Kathmandu. Private sector air service provider Shree Airlines Private Limited has achieved a significant increase in turnover figures in the first half of the current fiscal year 2081.82. Total operating income Shree Airlines has earned a total of Rs 2.57 billion in the first 6 months of the current fiscal year.
According to rating agency Infomerics Nepal, there has been a total increase of 27 percent in turnover during this 6-month review period. The airline’s profit after tax had increased by 122 percent to Rs 357 million in the last fiscal year 2080.81. Its gross profit in the current fiscal year has reached Rs 357 million. The airline has improved its after-tax profit margin by 10.25 percent.
Operating margin has expanded significantly from 27 percent in the previous fiscal year to 34 percent in the first half of the current fiscal year. According to the rating agency, its operating costs have improved after the introduction of fuel-friendly Q400 model aircraft.
Shri Airlines has added three Q400 model turboprop aircraft to its fleet, taking its total to 18 aircraft, including 10 aircraft and 8 helicopters. Revenue from large aircraft has accounted for a larger share compared to helicopters. Revenue from large aircraft flights in the total operating income is 89 percent. The remaining contribution is from helicopter flights. Although short-haul flights by helicopter do not contribute significantly to the company’s business, they have helped it weather the shock of fluctuations in foreign exchange rates.
Shri Airlines has a 16 percent market share in terms of passenger numbers. Most of its flights are focused on Dhangadhi, Nepalgunj, and Surkhet. On this relatively long-haul route, Shree Airlines’ aircraft complete the flight at least 15 minutes faster than competitor Buddha Air’s ATR aircraft. Revenue from the Nepalgunj and Dhangadhi routes contributed a significant 59 percent to its revenue last fiscal year. After starting flights on Kathmandu-Surkhet and Kathmandu-Pokhara routes, the contribution of flights to Dhangadhi and Nepalgunj has decreased to 51 percent in this fiscal year.
Since the aircraft owned by Shree Airlines consume sufficient fuel, its aircraft are economically suitable only for long-haul flights rather than short-haul flights. Since flying on short-haul routes such as Simara, Bharatpur, and Janakpur results in higher expenses than income, it has been prioritizing long-haul flights.
As the airline has invested a total of Rs. 3 billion in the purchase of new aircraft, its capital-to-debt ratio has reached 3.24 times. Aviation fuel costs have increased from 51 percent to 53 percent of total operating expenses in the first six months of the current fiscal year. This indicates the impact on profitability due to fluctuations in global crude oil prices.
With no major capital expenditure planned, Shree Airlines aims to reduce debt and increase profitability through route expansion and operational efficiency. The airline’s ability to maintain business and profit growth amid volatile fuel prices and competitive pressures will be critical to its progress, Infomerics Nepal said in a press release.
Infomerics Nepal has assigned a ‘triple B’ credit rating to the long-term debt of Rs 4.368 billion, instead of the previous ‘double B’, based on its financial strength assessment. Similarly, it has assigned a ‘A3’ rating to short-term loans worth Rs 1.4237 billion, instead of the previous ‘A4’. The rating agency claims that both these ratings indicate a stronger financial position than the previous one.
