After the DGCA imposes operation restrictions, SpiceJet's stock drops 10% and reaches a two-year low

SpiceJet was requested by the aviation regulator DGCA to cut its services in half for eight weeks, which caused the company's shares to drop 10% and to a two-year low of Rs 34.60 on the BSE on Thursday. SpiceJet responded by stating that it has already been operating at half of its authorized capacity, therefore negating the impact of the regulator's stringent rule on its business.

The aviation regulator's order on Wednesday stated that SpiceJet's number of departures would be limited to 50% of the number of departures authorized under the summer schedule 2022 for eight weeks "in light of the findings of various spot checks, inspections, and the reply to the show cause notice submitted by SpiceJet."

Any increase in the number of flights, according to the DGCA's statement on Wednesday, will depend on "the airline demonstrating to the satisfaction of the DGCA that it has sufficient technical assistance and financial resources to perform such additional capacity."

The action was taken shortly after the Indian aviation ministry informed the house that SpiceJet had not been the subject of "any major substantial finding or safety breach" by the DGCA.

Two separate air safety issues were recorded by SpiceJet earlier in July, one of which required an emergency landing in Pakistan for a plane headed for Dubai because of a cockpit light malfunction.

SpiceJet Stock

The airline company's stock recently traded at its lowest level since March 2020. It traded 7% lower at Rs 35.75 at 09:56 AM compared to the S&P BSE Sensex's 0.96 % gain. SpiceJet's 52-week high of Rs 87.25, which it reached on November 24, 2021, has been adjusted by 60%.

In comparison to the Nifty Smallcap 100's growth of 56.64 percent over the past three years, the stock has had a negative return of 73.94 percent. A low-cost airline called SpiceJet has a market value of Rs 2,142.40 crore.

After eight occurrences in a month, SpiceJet received a show cause notice from the DGCA in the first week of July for failing to provide services that were safe, effective, and reliable. The airline was requested to justify in three weeks why they shouldn't be subject to punishment. Before this, the DGCA learned about SpiceJet's insufficient supply of replacement parts last year during a financial audit.

Due to the ransomware assault on their IT systems, SpiceJet has yet to release its financial reports for the period and fiscal year ending March 31, 2022. The corporation said on May 27, 2022, that it is taking corrective action with help from authorities and cyber specialists.

SpiceJet recorded a combined net loss of Rs 1,259 crore for the first nine months ended December 2021 (9MFY22), compared to a loss of Rs 773 crore in 9MFY21.

Over half of SpiceJet's fleet, which consists of about 80 narrow-body aircraft, are Boeing 737 versions, and it commands nearly 10% of India's domestic market.

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