SpiceJet under enhanced surveillance after special audit, DGCA says it would increase spot checks

The Directorate General of Civil Aviation (DGCA) on Thursday said budget carrier SpiceJet has been placed under 'enhanced surveillance' with immediate effect. This decision has been taken to implement increased spot checks and night surveillance to uphold the safety standards of the airline's operations.

"In light of the past record and the special audit carried out in August 2024, SpiceJet has once again been placed under enhanced surveillance with immediate effect. "This would entail an increase in the number of spot checks/ night surveillance with a view to ensure the safety of operations," DGCA said in a release.

DGCA said it conducted a special audit of the airline's engineering facilities on August 7 and 8 and certain deficiencies were found during the special audit.

It further added: "It may be recalled that after a series of occurrences reported on the Spicejet fleet in 2022, a special drive of spot checks was undertaken during which Spicejet was permitted to release aircraft for operations only after confirming to DGCA that all reported defects/ malfunctions had been rectified. During the year 2023, based on reports of the airline being under financial stress, it was again placed under enhanced surveillance."

DGCA recently made a swift decision following an incident at the Dubai airport where passengers of a certain airline were barred from boarding their flights. This action was taken due to the airline's failure to settle overdue payments owed to the airport. This event marked the second disruption of SpiceJet flights departing from Dubai in this month alone. SpiceJet, facing financial challenges, has encountered difficulties with aircraft lessors and several airports. 

The airline, currently in the process of raising funds through a qualified institutional placement, has also faced issues regarding timely salary disbursements.

Later, Spicejet in a statement said: "Due to operational reasons, a few SpiceJet flights from Dubai were cancelled. Affected passengers have been accommodated on subsequent SpiceJet flights, on other airlines or provided with a full refund." 

For a while, Ajay Singh, the promoter of SpiceJet, has been actively seeking investors in order to dilute a significant stake with the aim of raising approximately Rs 3,000 crore. Although the airline initially projected to secure about Rs 2,250 crore from a group of 64 investors, it could only attain Rs 1,060 crore as a key investor withdrew their support.

The urgent requirement for capital to sustain company operations is paramount, as multiple endeavors to secure funding have proven futile. SpiceJet has encountered challenges in meeting payment obligations to various vendors, notably aircraft lessors, leading to legal actions such as bankruptcy petitions being lodged against the airline.

In June quarter, SpiceJet Ltd reported a 19.65 per cent drop in consolidated profit. The carrier's profit came at Rs 158.75 crore in Q1 FY25 as against Rs 197.58 crore in the year-ago period. During the quarter under review, the airline's revenue from operations also took a hit and slipped 14.15 per cent to Rs 1,646.21 crore from Rs 1,917.43 crore in the corresponding period last year.

SpiceJet said it achieved an operating profit of Rs 393 crore sequentially, underpinned by a solid EBITDA of Rs 401 Crore, reflecting a significant improvement from Rs 310 crore in Q4 FY24. SpiceJet also reported an EBITDAR of Rs 650 crore, up from Rs 616 crore over Q4 FY24.

It also mentioned that it continued to lead the industry with the highest domestic load factor of 91 per cent, reinforcing its strong market position and operational excellence.

"In a major move to further strengthen its financial position and support its growth plans, SpiceJet has already initiated the process of raising Rs 3,000 crore through a Qualified Institutional Placement (QIP), which is expected to be completed by the end of September 2024," the airline also said.