NEW DELHI: The tidings are not good for the Kalanithi Maran-promoted low-cost carrier SpiceJet, for more reasons than one. The airline stands on the brink of losing its international flying rights; its shares have gone down by 23 per cent in the last three trading sessions; its market value has dropped by 13.76 per cent since September and, to top it all, it has come under the daily audit of the Director-General of Civil Aviation. The last means the airline will have to reveal, on a daily basis, the number of passengers carried, flights operated and tickets sold, and explain if these are in proportion with the number of flights it operates.
SpiceJet flies to five international destinations of Male, Dubai, Kabul, Colombo and Kathmandu. For any airline to continue flying abroad, the DGCA rule mandates that it should have a minimum fleet size of 20 aircraft and five years of domestic flying experience, or the 5-20 rule as it is called. From 35 aircraft in September, the airline now has 22-24 aircraft. The shortage of aircraft forced the airline to reduce its daily flights from 345 in September to 232 flights per day now.
“SpiceJet’s fleet size is now precariously poised at 22 aircraft. If, owing to paucity of funds, it is not able to service its lease obligations and loses three more aircraft, its international flying permit will stand terminated,” warns a sector specialist on the condition of anonymity. He adds that more cancellations will lead to further problems for the airline as it will have to refund passengers leading to further revenue loss for the carrier.
In case the airline is grounded, apart from the promoters, passengers too will suffer, as they will be left with just three airlines: Air India, Jet and IndiGo as the only low-cost carrier.
According to aviation watchdog International Air Transport Association (IATA), as many as 3.3 billion passengers are expected to criss-cross Indian skies by the end of this calendar year.
An airline shutting down will lead to a severe scarcity of seats, especially in the low-cost segment during the peak travel season. This, in turn, will mean an escalation of spot as well as advance fares for passengers, December being the peak season for the aviation sector.
Coming to SpiceJet’s shares, they have been very volatile of late. The shares were range-bound at Rs 14 per piece till November 20, but shot up to Rs 21 between December 1 and 2, thus registering a 50 per cent jump. By December 5, though, the shares closed at Rs 15.95 apiece. This means a plummet of a harsh 23 per cent.
Led by the sharp fall in its share value, the airline’s market value too has eroded sharply. It’s now valued at Rs 853.77 crore, down from Rs 990 crore in September.