SpiceJet: In the eye of a perfect storm
- The airline has reported eight malfunction incidents in the last 18 days, which led to a notice from the regulator.
- From several technical malfunctions to bird hits to engine and untrained pilots, the airline has been pulled up for risking thousands of lives.
- Following these risky events, even investor confidence in the low-cost carrier airline has dropped.
AdvertisementGurgaon-based SpiceJet is in the eye of a storm as a slew of air-safety incidents have drawn the ire of the Indian aviation regulator and undermined passenger and investor confidence in the airline.
The regulator Directorate General of Civil Aviation (DGCA) on Wednesday issued a show cause notice to the budget carrier, after the airline reported eight malfunction incidents in the last 18 days. DGCA said that the airline had failed to establish safe, efficient and reliable air services.
High flight cancellations and rising consumer complaints against the carrier have only added to the airline’s woes.
After SpiceJet was slapped with the DGCA notice, civil aviation minister Jyotiraditya Scindia tweeted, "Passenger safety is paramount. Even the smallest error hindering safety will be thoroughly investigated and course-corrected.”
Thanks to these incidents, the company shares have been battered 28% percent since the beginning of May.
In the past month, SpiceJet’s aircrafts have had cases of technical malfunctions and bird hits to the engine, among others, risking thousands of lives.
“The aircraft either turned back to its originating station or continued landing to the destination with degraded safety margins,” said the DGCA in a notice after a spate of air-safety incidents.
In the latest incident, the airline’s freighter aircraft headed to Chongqing in China had to return to Kolkata on Tuesday as the pilots realised that its weather radar was not working.
Another risky incident took place this month when a Delhi-Dubai flight was forced into an emergency landing in Karachi, Pakistan, after pilots noticed unusual fuel reduction in one of the tanks.
Apart from this, SpiceJet has also cancelled the maximum number of flights in the month of May, as per a DGCA report. This has been one of the top factors behind customer complaints and dissatisfaction.
AdvertisementAccording to the DGCA report, around 550 passenger complaints were registered against domestic airlines, out of which 0.8 per 10,000 passengers were against Spicejet in the month of May this year.
About 44% of Indians have also expressed their concerns and say they might avoid travelling in SpiceJet flights after these air incidents in the future, says a LocalCircles survey.
Cup of woes
All these incidents have taken a toll on the investors' confidence, as they beat down the SpiceJet shares by 18 % in the last one month.
SpiceJet’s woes do not end here as it also has to contend with the entry of new, well-capitalised players into the aviation market – Akasa, Jet Airways and the upgraded avatar of Air India, after its acquisition by the Tata group. The rising jet fuel prices and the battle for human resources in the industry is also a rising concern.
|SpiceJet share||% share price change|
|2022 so far||-43%|
|Last one year||-52%|
“Despite travel and tourism picking up, the stock is under pressure due to reasons like – high fuel prices from last fortnight and increase of aviation turbine fuel (ATF) prices. The air-safety incidents that have been taking place have kept the airline’s stocks and operations under pressure,” Kranthi Bathini, director of equity strategy at WealthMills Securities told Business Insider India.
“Moreover, the new bird Akasa will give a tough competition to the low-cost carrier,” Bathini added.
The airline’s losses have more than tripled since 2019. It is yet to report its FY22 results because of ransomware attacks on its IT systems.
Source: Company’s financial reports
|FY2021||₹6,072 crore||₹1,029 crore|
|FY2020||₹13,134 crore||₹936 crore|
|FY2019||₹9,179 crore||₹302 crore|
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