SpiceJet puts aviation in hot soup

these are strange times. they have been for a while. people are growing weary of all the precautions to be taken against Covid-19, but at the same time they know they cannot afford to be reckless. they want nothing more than to get on the next flight to that dream getaway, but it is no longer as easy as booking a ticket, hailing a taxi, and hopping on board a plane. in between there are multiple rounds of Covid-tests, vaccination requirements, safety measures, inflated ticket prices, and more. thus they wait.

while they wait, someone else is suffering along with them. the aviation industry, among the few sectors yet to fully bounce back from the blow dealt by the pandemic. Chief among them, SpiceJet. why is it that its stock, even in the midst of a market bull rally, is sitting at a 22% discount to where it began the year?

plane eat plane world

overall, the number of domestic flyers is just now beginning to return to pre-pandemic levels. the brief uptick in between, during the first couple of months of 2021, was scuppered by the second wave of Covid-19. with rising fares, the focus is mainly on budget airlines.

SpiceJet, however, appears to be in a downward trend. for October, it was upended by Vistara for the position of third-highest market share holder at 8.7% vs 8.5%. GoAir (now Go First) was also not too far behind it at 8.2%. fellow low-cost carrier IndiGo dominates the domestic market with a 56.2% share. with Rakesh Jhunjhunwala also set to launch a budget carrier, SpiceJet’s market share could be set to dip even further.

bills, bills, bills

this means SpiceJet’s revenues are struggling to bounce back. at the same time, operating costs have continued to mount. it has reported losses for six consecutive quarters, and seems unlikely to reverse that anytime soon.

it owes money to various industry stakeholders. aircraft leasing companies are facing a liquidity crunch due to its non-payment, protest by employees over non-payment of salaries have spread across the country, and CRISIL has withdrawn its rating to the airline which now sits in the non-cooperating category.

bleak as the situation may be, there’s still a faint ray of hope over the horizon. SpiceJet recently launched 28 new domestic flights, signaling it expects business to recover. its chairman, Ajay Singh, has stated that it will now focus on profitability over market share.