New Delhi: The budget airline, SpiceJet, is finally out of the director general of civil aviation’s (DGCA) ‘enhanced surveillance regime’. The DGCA , the aviation watchdog, removed the airline from the enhance surveillance regime after conducting inspections on a total of 23 aircraft and making 95 observations.
The civil aviation regulator conducted 51 spot cheques across 11 locations specifically on the airline’s Boeing 737 & Q-400. Earlier this month, it was reported that SpiceJet was under enhanced surveillance for over three weeks due to various financial challenges faced by the budget airline in recent months. SpiceJet had been dealing with cases of lessors seeking repossession of leased aircraft, though some issues have been resolved by the airline.
DGCA clearance push up SpiceJet shares
Apparently emboldened by getting struck out of the DGCA’s surveillance list, the shares of SpiceJet witnessed about 4% surge, while the benchmark indices remained flat with a negative bias.
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Industry experts say that the primary objective of the enhanced surveillance was to prevent any adverse impact on flight operations due to financial concerns. The enhanced surveillance involves increased night surveillance and spot cheques to ensure that financial issues do not lead to potential adverse impacts on flight operations, and that safety standards are not compromised.
The aviation regulator had in July last year asked SpiceJet to reduce the total number of flights by 50% for eight weeks due to repeated safety incidents. Subsequently, the airline was placed under ‘enhanced surveillance’.
SpiceJet had tough financial conditions
In a financial assessment conducted by DGCA in September 2021, it was revealed that SpiceJet was operating on a cash and carry basis, leading to delayed payments to approved vendors. The airline also faced shortage of spares, leading to frequent invocation of Minimum Equipment Lists (MELS).
Also Read: SpiceJet to put 25 grounded planes back in commercial operation
Earlier this month, the Supreme Court directed SpiceJet to pay the entire arbitral amount of ₹380 crore to its former promoter, Kalanithi Maran, emphasising the importance of conducting business with ‘commercial morality.’ However, the Sun Group, which now owns SpiceJet, has rejected the possibility of an amicable settlement with the other party.
The airline was also not able to pay aircraft lease rental, which prompted lessors to file insolvency petitions against the airline. The shortage of cash flow also restrained the airline to capitalise on the growth and consolidation in Indian civil aviation, which has surpassed pre-Covid air traffic numbers. Currently, the airline holds a market share of 5.4%, slightly ahead of new entrant Akasa Air, which holds 5% of the market share.
