SpiceJet shares skid 6% after DGCA puts airline under enhanced surveillance

In a new challenge for budget airline SpiceJet, India's aviation regulator, Directorate General of Civil Aviation (DGCA), has placed the airline under 'enhanced surveillance' effective immediately. This move means that SpiceJet will now face more frequent spot checks and night-time monitoring to ensure operational safety, as per DGCA.

Weighed down by the development, SpiceJet shares dropped as much as 6.4% to ₹61.99 apiece on Friday. At the time of reporting, shares were trading at ₹62.15, down 6.16% from the previous closing price of ₹66.23. The stock opened lower at ₹62.40 today, in contrast to the strong broader market. The budget airline currently has a market capitalisation of ₹4,931.96 crore.

SpiceJet stock has risen 8% over the past month and 3% year-to-date (YTD), while it lost 2.68% in the last six months. The airline’s stock hit a 52-week-high of ₹77.50 on February 5, 2024, and touched a 52-week-low of ₹30.92 on August 31, 2023.

The DGCA's decision follows a special audit conducted on August 7 and 8, 2024, which revealed several deficiencies in SpiceJet's engineering facilities, DGCA adds. The audit's findings, coupled with the airline's ongoing financial difficulties and flight cancellations, led to this heightened oversight.

Reports indicate that SpiceJet recently had to operate empty flights from Dubai due to passengers being unable to check in because of unpaid airport fees. An airline spokesperson clarified that all flights from Dubai are now running as scheduled, countering any claims of operational halts.

Recently, DGCA imposed a ₹90 lakh fine on Air India for operating a flight with an ‘unqualified’ crew, including pairing a non-trainer captain with an unqualified first officer. Additionally, fines of ₹6 lakh and ₹3 lakh were levied against Air India's director of operations and director of training, respectively. This penalty followed a detailed investigation prompted by a report submitted by Air India on July 10, 2024.

After receiving the report, the regulator conducted an in-depth investigation into Air India's operations. This involved examining documents and performing a spot check of the airline's scheduling system. The investigation revealed numerous regulatory violations and shortcomings that could have compromised safety.

SpiceJet reported a 19.65% decline in its consolidated profit for the June 2024 quarter (Q1 FY25), with earnings falling to ₹158.75 crore from ₹197.58 crore in the same quarter last year. The airline's revenue from operations also decreased by 14.15%, dropping to ₹1,646.21 crore from ₹1,917.43 crore year-over-year (YoY).

However, the carrier achieved a sequential operating profit of ₹393 crore, driven by EBITDA (Earnings before Interest, Taxes, Depreciation, Amortisation) of ₹401 crore, which marked improvement from ₹310 crore in Q4 FY24. SpiceJet also saw its EBITDAR (EBITDA and Restructuring or Rent costs) increase to ₹650 crore, up from ₹616 crore in the previous quarter.