SpiceJet Shares Drop 6% After DGCA Puts Airline Under Enhanced Watch Due to Safety Concerns

SpiceJet shares fell by 6.4% to Rs 62 in Friday’s trading on the BSE after the Directorate General of Civil Aviation (DGCA) put the airline under enhanced surveillance. This move comes after an audit revealed some issues with the airline’s operations.

On Thursday, DGCA announced that it would increase spot checks and night inspections of SpiceJet to ensure the airline’s safety. The decision was made following reports of flight cancellations and financial troubles at SpiceJet. DGCA conducted a special audit of SpiceJet’s engineering facilities on August 7 and 8, and found several deficiencies.

Given SpiceJet’s past record and the findings of the August 2024 audit, DGCA has decided to place the airline under enhanced surveillance again. This means more frequent checks to ensure all operations are safe.

Previously, after several incidents in 2022, DGCA had already increased checks on SpiceJet. In 2023, due to financial concerns, the airline was put under enhanced surveillance as well.

SpiceJet’s financial troubles have been ongoing. The airline’s promoter, Ajay Singh, has been looking for investors to raise about Rs 3,000 crore by selling a large stake. Although SpiceJet initially aimed to raise Rs 2,250 crore from 64 investors, it managed to secure only Rs 1,060 crore because one major investor backed out. The airline urgently needs cash to continue operations but has struggled to raise funds. It has defaulted on payments to vendors, including aircraft lessors, some of whom have filed for the airline to be declared bankrupt.

Recently, SpiceJet reported a 20% drop in its net profit to Rs 158 crore for the first quarter ending June 2024, compared to Rs 198 crore in the same period last year. Revenue from operations also fell by 15% to Rs 1,708 crore from Rs 2,003 crore the previous year.

At 10:31 a.m. on Friday, SpiceJet’s stock was down 5.1% at Rs 62.85 on the BSE. While the stock has only delivered a 4% return this year, it has surged nearly 100% over the past 12 months.