Shares of SpiceJet and InterGlobe Aviation, the operator of IndiGo Airlines, jumped on Wednesday a day after the aviation regulator green-flagged international flight operations after a gap of two years. SpiceJet stock jumped about 6.5% to an intraday high of Rs 60.75 per share, while IndiGo shares rose 8% to an intraday high of Rs 1726.45 apiece. Even though the share prices are nowhere near the 52-week highs, the announcement from the Ministry of Aviation on Tuesday to allow regular international commercial flights from March 27 comes as a sigh of relief amid the high jet fuel prices.
IndiGo shares jumped 8% to Rs 1,727 apiece on the NSE and were trading at Rs 1,713.00 apiece, up 7%, during the afternoon trading. On the NSE, SpiceJet rose 6.4% in intraday trading at Rs 60.75 apiece and was trading at Rs Rs 59.70 apiece, up 5%, in afternoon trading on the bourse. Jet Airways (India), whose flight operations are currently grounded also rose nearly 5% on NSE and the BSE. On both the bourses, however, trading was halted when the shares hit the upper circuit limit of 5%.
In an announcement Tuesday, the aviation ministry said it recognised the increased vaccination coverage across the globe and after a consultation with the stakeholders, the government has decided to resume scheduled commercial international passenger services to/ from India from March 27, 2022 i.e. the start of summer schedule 2022. International flights were operating in the country but only for limited routes i.e. only with 37 countries under air bubble arrangements.
Amid the ongoing conflict between Ukraine and Russia, oil prices have surged around the globe and caused a scarcity in oil products such as jet fuelds. In India, jet fuel prices were hiked for the fifth time earlier this month. Analysts say that the rising aviation turbine fuel prices (ATF) dim the prospects of the airline sector and will chomp on airlines revenues. ICICI Securities said earlier this month, high fuel prices will likely squeeze gross spreads of airlines. “Airlines tend to enjoy higher gross spreads when fuel prices are low. However, they are unable to completely pass on the rise in fuel prices through higher fares,” the brokerage said, citing historical data. Fuel prices account for roughly 40% of an airline’s costs and hence rising costs (such as fuel prices) will cut their earnings.
Eqwires Research Analyst
Top-notch SEBI registered research analyst
Best SEBI registered Intraday tips provider and Best SEBI registered stock advisory company
Call: +91 9624421555 / +91 9624461555