DGCA extends the 50% cap on SpiceJet flight operations; keeps it under enhanced surveillance

SPICEJET

The Director General of Civil Aviation (DGCA) said on September 21 that it is extending domestic budget carrier SpiceJet suspension to operate at 50% capacity till October 29.

In its order dated September 21, the aviation regulator said that it is extending the restriction imposed on the budget carrier as a cautionary measure. In the meantime, SpiceJet shall be under “enhanced surveillance” by the DGCA.

If SpiceJet wants to operate more than 50% of its fleet then it will have to prove to the DGCA that it has adequate technical support and financial resources to increase its capacity, the regulatory body added.

DGCA order

The statement issued by the DGCA read: “Any increase in the number of departures beyond 50% of the total number of departures approved under the Summer Schedule 2022, during this period, shall be subject to the airline demonstrating to the satisfaction of DGCA that it has sufficient technical support and financial resource to safely and efficiently undertake such enhanced capacity.”

ALSO READ – SpiceJet to send 80 Captains on LWP amid financial instability

The DGCA announcement came a day after SpiceJet decided to send 80 pilots on leave without pay for three months to cut costs. The airline has claimed that despite several pilots being sent on leave without pay, it would have sufficient capacity to operate its full schedule as and when the DGCA restriction on flights is lifted.

“In a temporary measure to rationalise costs, SpiceJet has decided to place certain pilots on leave without pay for three months. This measure, which is in line with SpiceJet’s policy of not retrenching any employee which the airline steadfastly followed even during the peak of the Covid pandemic, will help rationalise the pilot strength vis-a-vis the aircraft fleet.”

SpiceJet

The pilots who have been told to be on leave without pay are from the airline’s Boeing and Bombardier fleet. Sources have revealed that the airline was expecting the DGCA to extend the cap on its operating capacity and sent pilots on leave without pay as a pre-emptive measure.

ALSO READ – DGCA orders SpiceJet to operate only 50% of approved flights

The civil aviation regulator on July 27 issued an order putting a cap on SpiceJet’s capacity based on the review of the safety performance of the airline. Under the order, the number of departures was restricted to 50% of the number approved under Summer Schedule 2022 for eight weeks.

Before that, the regulator had issued a show-cause notice to the airline saying that it had failed to “establish safe, efficient and reliable air services”. SpiceJet had reported multiple technical malfunctioning incidents between April 1 and July 5.

SPICEJET
DGCA extends the 50% cap on SpiceJet flight operations; keeps it under enhanced surveillance

The DGCA had also issued a warning notice to the airline after reviewing a series of incidents that showed “poor internal safety oversight and inadequate maintenance actions” by SpiceJet.

ALSO READ – Spicejet looking for a “knight in shining armour” to help with financial distress

SpiceJet promoter has been trying to raise funds and is in talks with various players for the stake sale. However so far there has been no recapitalisation. As a result, SpiceJet has been delaying paying whatever percentage of salaries it gives to employees; is not paying PF to many staffers and is yet to give Form 16 of last fiscal.

ALSO READ – Struggling to-Survive SpiceJet allegedly not depositing PF in employee accounts

The only lifeline has been a credit facility of about INR 200 crore under the emergency credit line guarantee scheme (ECLGS). The airline’s troubles have been mounting in the past few months due to its inability re-capitalise so far despite reported attempts to sell stakes to raise about INR 2,000 crore.

SPICEJET
The DGCA announcement came a day after SpiceJet decided to send 80 pilots on leave without pay for three months to cut costs.

ALSO READ – SpiceJet set to receive funds through ECGLS, an extension of up to 3 months for AGM’22

In the past few months, six Boeing 737 rented to it have been repossessed by lessors. SpiceJet’s chief financial officer (CFO) Sanjeev Taneja resigned with effect from August 31, 2022. The airline lost INR 1,725 crore in FY 2022. The company’s accumulated losses as on March 31, 2022, were INR 5,912.6 crore.

ALSO READ – The worst nightmare of SpiceJet – From financial losses widening to the CFO resigning to non-payment of salaries

Its net worth has completely eroded, with current liabilities exceeding its current assets by INR 6,408.7 crore as on March 31, 2022. SpiceJet has for nearly a year been saying that it will get more Boeing 737MAX. Industry sources say the question is whether it can manage to finance those aircraft.

ALSO READ – Cash-strapped SpiceJet plans to take delivery of 7 Boeing 737 Max

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