SpiceJet: In the eye of a perfect storm

• The airline has reported eight failure incidents in the past 18 days, which have led to a notice from the regulator.
• From various technical failures to bird attacks to engine and untrained pilots, the airline has been busted for risking thousands of lives.
• As a result of these risky events, even investors’ confidence in the low-cost airline has plummeted.

Gurgaon-based SpiceJet finds itself in the eye of a storm as a slew of air safety incidents have sparked the ire of the Indian aviation regulator and undermined passenger and investor confidence in the airline.

The regulator’s Directorate General of Civil Aviation (DGCA) issued a statement on the cause of the show to the budget carrier on Wednesday, after the airline reported eight failure incidents in the past 18 days. DGCA said the airline had failed to establish safe, efficient and reliable air services.

High flight cancellations and mounting consumer complaints against the carrier have only added to the airline’s woes.

After SpiceJet took a hit with the DGCA message, Civil Aviation Minister Jyotiraditya Scindia tweeted: “Passenger safety comes first. Even the smallest mistake that hinders safety will be thoroughly investigated and course corrected.”

Thanks to these incidents, the company’s shares have been battered by 28% percent since the beginning of May.

In the past month, SpiceJet’s planes have suffered technical failures and bird strikes on the engine, among other things, with thousands of lives at risk.

“The aircraft either returned to its departure station or landed onward to its destination with deteriorating safety margins,” the DGCA said in a statement following a spate of air security incidents.

In the latest incident, the airline’s cargo plane bound for Chongqing in China had to return to Kolkata on Tuesday after pilots realized the weather radar was not working.

Another high-risk incident occurred this month when a Delhi-Dubai flight made an emergency landing in Karachi, Pakistan, after pilots noticed unusual fuel savings in one of the tanks.

Apart from this, SpiceJet has also canceled the maximum number of flights in the month of May, according to a DGCA report. This is one of the main factors behind customer complaints and dissatisfaction.

According to the DGCA report, about 550 passenger complaints were registered against domestic airlines, with 0.8 per 10,000 passengers in May this year against Spicejet.

About 44% of Indians have also expressed concern, saying they may avoid traveling on SpiceJet flights in the future after these air incidents, according to a survey by LocalCircles.

cup of misery
All of these incidents have taken their toll on investor confidence as they beat SpiceJet stock by 18% in the past month.

SpiceJet’s woes don’t stop there, as it also has to do with the entry of new, well-capitalized players into the airline market – Akasa, Jet Airways and Air India’s improved avatar, following its takeover by the Tata group. Rising jet fuel prices and the struggle for human resources in the industry are also growing concerns.

“Despite the pick-up in travel and tourism, the stock is under pressure for reasons such as – high fuel prices over the past two weeks and increase in aviation turbine fuel (ATF) prices. The air safety incidents that have occurred have put a strain on the airline’s inventories and operations,” Kranthi Bathini, director of equity strategy at WealthMills Securities, told https://cafe-madrid.com/ India.

“In addition, the new bird Akasa will present tough competition to the low-cost carrier,” Bathini added.

The airline’s losses have more than tripled since 2019. The airline has yet to report results for fiscal year 22 due to ransomware attacks on its IT systems.

Source: Company Financial Reports

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