Cash-Strapped SpiceJet Now Said To Be Hit By Fraud, Shares Tank 2%

Shares of SpiceJet were dropping on Wednesday after an internal audit reportedly found discrepancies in the cash-strapped airline’s operations.

What Happened: SpiceJet has encountered a troubling incident involving fraud, as revealed by an internal audit conducted by the budget airline, the Economic Times reported, citing sources. The audit unearthed instances where certain senior executives had cancelled scheduled flights to accommodate charters, resulting in financial setbacks for the company.

Executives familiar with the matter told the business daily that the audit unveiled that these officials were receiving commissions from agents to sell charters at rates below the prevailing market prices. In response, SpiceJet has terminated the employment of three individuals and is implementing stricter controls within its commercial department, including sales and revenue management.

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Charters, which are unscheduled flights operated upon specific demand, became a vital revenue stream during the COVID-19 pandemic. In the fiscal year 2023, SpiceJet operated 1,568 charter flights, catering to over 2.48 lakh passengers.

An internal audit reportedly revealed that charter flights were sold at half the market rates, resulting in potential revenue loss compared to operating scheduled flights. Further, it was discovered that certain officials were receiving commissions from agents to sell flights at lower prices.

Operating charters instead of scheduled flights was deemed detrimental, as it inconvenienced customers and risked financial losses. SpiceJet, currently undergoing significant restructuring due to a cash crunch, has recently raised around ₹1,000 crore and embarked on cost-saving initiatives, including staff layoffs and fleet reduction. Promoter Ajay Singh has become more actively involved in overseeing company performance, aiming to fix inefficiencies amid a recent funding infusion.

Price Action: SpiceJet’s share price was down 1.99% at ₹54.09 in morning trade on Wednesday.

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