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Stock market: Why Airlines shares performed well today; IndiGo, SpiceJet jump upto 13%

Beating the market, share price of InterGlobe Aviation surged as much as 12.84 per cent to Rs 1,029 compared to the previous close of Rs 911.90 on BSE

twitter-logo BusinessToday.In   New Delhi     Last Updated: May 21, 2020  | 21:31 IST
Stock market: Why Airlines shares performed well today; IndiGo, SpiceJet jump upto 13%
SpiceJet shares hit an upper circuit of 4.88 per cent to Rs 42.95 compared to the previous close of Rs 40.95

Shares of airlines soared up to 13 per cent on domestic bourses on Thursday after the Civil Aviation Ministry announced domestic flights will resume operations from May 25 "in a calibrated manner". In comparison, the BSE Sensex ended 114 points, or 0.37 per cent, higher at 30,932.

The rally in the aviation sector, one of the worst-hit in the COVID-19 crisis, comes with InterGlobe Aviation, the parent company of IndiGo airline, and SpiceJet bouncing back after recent fall. For now, investors are buoyed by the government's decision to resume services.

Beating the market, share price of InterGlobe Aviation, India's largest airline by passengers carried and fleet size, surged as much as 12.84 per cent to Rs 1,029 compared to the previous close of Rs 911.90 on BSE. Paring some of early gains, InterGlobe Aviation stock closed Thursday's trade at Rs 978.25, up 7.28 per cent.

On the volume front, there was surge in buying as 7.57 lakh shares changed hand over the counter as compared to two-week average volume of 1.44 lakh shares on the BSE.

InterGlobe Aviation share price has lost 33.69 per cent in last one year and 26.59 per cent since the beginning of this year.

In a similar trend, SpiceJet shares hit an upper circuit of 4.88 per cent to Rs 42.95 compared to the previous close of Rs 40.95. SpiceJet stock has gained after 3 days of consecutive fall. The company's share has lost 66.09 per cent in one year and 61.89 per cent since the beginning of this year.

Also Read: Mumbai-Delhi flights min price capped at Rs 3,000, max Rs 10,000

On Wednesday, after market hours, Civil Aviation Minister Hardeep Singh Puri announced that domestic flight operations will resume in a calibrated manner from May 25. All commercial passenger flights in India had been suspended since March 25, when the nationwide lockdown was first imposed to contain the spread of the novel coronavirus.

The move is likely to provide major respite to airlines, which are staring at massive revenue loss due to the suspension of services due to coronavirus-led nationwide lockdown.

Also Read: SpiceJet, InterGlobe Aviation shares rise up to 10% as domestic operations to resume from May 25

According to CARE Ratings, the decision to resume services does not mean it will be able to stimulate the needed passenger traffic given how the virus is showing no signs of abating. "We still believe passenger traffic will decline by 30 per cent during FY21 as there will be certain inhibitions and apprehensions of travelling," said the rating agency.

Earlier on Thursday, the Civil Aviation Ministry issued the guidelines for airlines, airports, passengers and other stakeholders ahead of the gradual resumption of flights from May 25. In a press briefing, Hardeep Singh Puri announced Rs 3,500 as lower limit and Rs 10,000 as higher limit for flight tickets. For instance, on the Delhi-Mumbai route, the minimum fare would be Rs 3,500 for a journey between 90-120 minutes, maximum fare would be Rs 10,000. This price cap will remain in for 3 months - till one minute to midnight on August 24, 2020.

Besides capping airfares, the ministry has put restriction on capacity of flight operations initially. Flight operations to be scaled up in a calibrated manner, the notification said. "On the day of commencement (May 25), limited operations (about one-third) would be permitted," it said.

By Chitranjan Kumar

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