Shares of SpiceJet fell 9.3% after DGCA halves capacity; hits 52-week low

Shares of SpiceJet fell as much as 9.3% on Thursday, July 28 a day after the country’s aviation regulator ordered the budget carrier to slash its approved fleet to 50% this summer for eight weeks, citing multiple safety snags.

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

The Director General of Civil Aviation (DGCA) also said that the domestic airline will be subjected to “enhanced surveillance”. SpiceJet sought to reassure its customers and said there was “absolutely no impact on its flight operations” after the DGCA order.

Shares of SpiceJet fell 9.3% after DGCA halves capacity; hits 52-week low

DGCA said any increase in the number of flights will be subject to “the airline demonstrating to the satisfaction of DGCA that it has sufficient technical support and financial resources to safely and efficiently undertake such enhanced capacity.”

On March 11, the DGCA approved 4,192 weekly domestic flights of SpiceJet for this year’s summer schedule, which ends on October 29. The recent order means the budget carrier will be able to operate not more than 2,096 weekly flights for the next eight weeks.

Earlier this month, the watchdog had issued a warning notice to SpiceJet after a review of incidents, which included a side windshield outer pane that cracked mid-flight and a malfunctioning indicator light.

DGCA approved 4,192 weekly domestic flights of SpiceJet for this year’s summer schedule, which ends on October 29.

“SpiceJet is taking measures for arresting the trend of incidents. However, the airline needs to sustain these efforts for safe and reliable air transport service,” the DGCA said in its order.

ALSO READ – DGCA finds no major safety violations during 53 spot checks on 48 SpiceJet aircraft

The move comes within days after the aviation ministry told the parliament that the DGCA did not find “any major significant finding or safety violation” in SpiceJet.

Following the update, the scrip hit its 52-week low of INR 34.60 on BSE. At 10:05 AM, it hovered around INR 35.65, 7.05% below its previous close of INR 38.30.

The stock has given a negative 3-year return of 73.94% as compared to a 56.64% rise seen in the Nifty Smallcap 100. SpiceJet is a budget airline with a market cap of INR 2,142.40 crore.

SpiceJet is a budget airline with a market cap of INR 2,142.40 crore.

SpiceJet shares, which touched on Thursday, July 28 their lowest levels since March 2020, are down about 44% so far this year.

“Domestic air travel demand tends to be very weak in September quarter, and thus, fares tend to drop on a quarter-on-quarter basis. This year, with SpiceJet’s capacity curtailed, the industry should be able to support better pricing,” Morgan Stanley analysts said in a note.

The shares of InterGlobe Aviation, the operator of India’s biggest airline IndiGo, rose as much as 2.9%. Indian airlines, which are on the cusp of recovery after being choked by travel closures during the peak Covid-19 pandemic, have also been affected by higher aviation turbine fuel costs.

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