SpiceJet stock down 5 percent on reports of high attrition

August 24th, 2011 - 7:36 pm ICT by IANS  

New Delhi, Aug 24 (IANS) The shares of SpiceJet closed over five percent down Wednesday on reports that some 100 staff, including pilots and cabin crew, have quit in the past few months to join rivals over management and operational issues.

The scrip had touched a 52-week low Aug 19.

“The company is going through a hard time and the markets know that. Last quarter, they made a loss of Rs.72 crore, and this quarter it is expected that the quantum of loss can be even more,” said Sharan Lillaney, analyst for aviation with Angel Broking.

According to analysts, data released by the civil aviation regulator that showed SpiceJet made the largest number of cancellations in June among all carriers — even higher than the state-run Air India — also did not go down well with investors.

The cancellations amounted to 2.9 percent for SpiceJet, as opposed to 1.3 percent for Kingfisher, 1.1 percent for JetLite, 0.6 percent for Jet Airways and nil for IndiGo and GoAir, said the Directorate General of Civil Aviation.

Such data also showed the carrier reported the worst on-time performance of 75.9 percent among private carriers, against 91.4 percent for Jet Airways, 90.2 percent for IndiGo, 89.1 percent for Kingfisher, 88.6 percent for JetLite and 87.5 percent for GoAir.

Financially, too, the going has been tough for SpiceJet, which reported a loss of Rs.72 crore for the quarter ended June 30, compared with a net profit of Rs.55 crore for the like period of last financial year.

This, despite improving its market share from 13 percent to 14 percent.

Reports have suggested that some 100 employees of the airline had quit due to the work environment and employment conditions. None of the officials at the airline’s corporate communications department nor its chief executive Neil Mills were available for comment.

“The airline sector is facing expansion pressures, while its financials are in the red. To maintain the growth story, companies need to recruit talent, which is in short supply,” said Amber Dubey, director, aerospace, for global consultancy KPMG.

“Retention of outgoing talent is difficult since the existing employers cannot make coutner offers of higher salaries. We, therefore, expect this cross-migration of talent to grow in the near future,” Dubey told IANS.

The shares of the company, which fell to a 52-week low of Rs.19.30 last week, opened Wednesday at Rs.23.85 and slid to the day’s low of Rs.22.50, before settling at Rs.22.60 at closing bell — down 5.04 percent.

“The SpiceJet scrip has also fallen due to a correction issued by the company that they are not in talks with any private equity player,” Angel Broking’s Lillaney told IANS, referring to the reports of the proposed stake sale to TPG.

“The company is not in discussions with TPG for stake sale and further, it cannot comment on market rumours and speculative reporting,” SpiceJet said in a regulatory filing with the Bombay Stock Exchange.

Other aviation experts also blame the under-performance of the airline’s stocks to the general perception about the company’s management — after the takeover by Sun Group’s Kalanithi Maran — and its ability to run an entirely different industry.

“There is a lot of uncertainty in the company about its future,” said a senior executive from a leading consultancy, who did not wish to be named.

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