1. Airline stocks fly high despite CCI headwinds

Airline stocks fly high despite CCI headwinds

Aviation scrips rallied 7-9% on Thursday as airline companies announced on the stock exchanges that they will be challenging the orders of the Competition Commission of India (CCI) in courts.

By: | Mumbai | Published: November 20, 2015 12:10 AM
aviation stocks

Aviation scrips rallied 7-9% on Thursday as airline companies announced on the stock exchanges that they will be challenging the orders of the Competition Commission of India (CCI) in courts. (Reuters image for representation only)

Aviation scrips rallied 7-9% on Thursday as airline companies announced on the stock exchanges that they will be challenging the orders of the Competition Commission of India (CCI) in courts.

Shares of Jet Airways closed up 7.93%, while those of SpiceJet added 8.85% during the session.

Shares of InterGlobe Aviation touched Rs 1,168.70, the highest-ever since the company got listed on the bourses during the second week of November. InterGlobe stock closed 9.7% higher on Thursday. The stock has yielded returns of nearly 50% from its issue price of Rs 765 per share.

Acting on unfair business practices in the aviation sector, the CCI had passed an order penalising the three airlines for cartelisation in determining the fuel surcharge on air cargo. CCI, which is the government authority to enforce the Competition Act, imposed penalties of Rs 151.69 crore and Rs 63.74 crore on Jet Airways and InterGlobe Aviation, respectively, while SpiceJet was ordered to pay Rs 42.48 crore.

The order was passed in response to a complaint filed by the Express Industry Council of India, a body representing logistic companies including Blue Dart, Fedex and DHL.

Falling prices of aviation turbine fuel in the international markets has improved the operating margins of the aviation companies during CY15, experts said. Aviation turbine fuel (ATF) costs have fallen nearly 28% during the calendar, Bloomberg data showed.

Better business environment has resulted in rally of stock of aviation companies. During the

year so far, SpiceJet has climbed nearly 235% while shares of Jet Airways have gone up 18%.

The government had released the Draft National Civil Aviation Policy 2015 on October 30 which aims at making flying affordable for the masses.

The draft underlines 16 critical areas of civil aviation including safety, regional connectivity, bilateral traffic rights, and maintenance, repair & overhaul (MRO) operations.

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