SpiceJet extends fall as DCGA continues flight restrictions

Shares of SpiceJet extended its losing streak for the second day after the Directorate General of Civil Aviation (DGCA) announced the extension of the restrictions on the carrier by a month as a matter of ‘abundant caution’. The aviation regulatory body has kept the airline under “enhanced surveillance” till October 29, extending its previous order to operate a maximum of 50% of its flights. On July 27, the Indian aviation watchdog had asked SpiceJet to cut the total number of flights by 50% for eight weeks amid repeated technical snags. This comes at a time when the market share of SpiceJet is declining and the company faces liquidity issues. It has sent about 80 pilots on leave without pay for about three months in order to "rationalise cost."

“The review has indicated that there is an appreciable reduction in the number of safety incidents. However, as a matter of abundant caution, the competent authority has decided that the restrictions as imposed in the order dated July 27.07.20222 that continue to be in force till the end of the summer schedule (which ends October 29, 2022)," the DGCA said in its latest order.

Reacting to the news, shares of SpiceJet opened 3% lower at ₹40.60, against the previous closing price of ₹41.85 on the BSE. During the first hour of trade so far, the stock declined as much as 4.9% to ₹39.8 amid a spurt in volume trade. As many as 2.64 lakh shares changed hands over the counter compared to the two-week average volume of 3.69 lakh stocks. In comparison, the BSE benchmark Sensex was trading 125 points lower at 59,331, following weak cues from global peers after the Federal Reserve raised the key interest rate by 0.75 basis points for its third straight month.

With a market capitalisation (m-cap) of ₹2,425.44 crore, SpiceJet shares trade lower than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The stock has fallen nearly 9% in two sessions and more than 10% in the past one week. In the past one month, the stock has tumbled 11.5%, while it delivered a negative return of 48% in one year. The share price has lost 41% in the calendar year 2022 (year-to-date basis). The stock hit a 52-week high of ₹87.25 on November 24, 2021, and a 52-week high of ₹34.60 on July 28, 2022.

The dwindling performance of Spicejet shares can be attributed to weak financials, cash loss due to high operating cost and low occupancy, and weak liquidity profile which is impacting its debt servicing ability. The accumulated losses or dues to vendors including lessors have climbed to over ₹2,000 crore for the Ajay Singh-led company. The budget carrier has recently secured ₹220 crore through the emergency credit loan guarantee scheme (ECLGS) introduced by the government post-pandemic to keep businesses afloat. Besides, the board of the company has also approved a fresh capital infusion of up to $200 million. 

The airline has been making losses for the last several years. For the June quarter of 2022 (Q1 FY23), it reported a net loss of ₹789 crore as business was severely impacted by record high fuel prices and a depreciating rupee. However, total revenue rose to ₹2,478 crore as against ₹1,266 crore in the same quarter of the previous year. For the same comparative period, operating expenses stood at ₹3,267 crore as against ₹1,995 crore.