Stocks of Indian airlines extended gains on Monday in anticipation of expansion in valuations after InterGlobe Aviation fixed an aggressive price band for its initial public offering.
SpiceJet jumped 10% to surge to its highest level in nearly three years. The stock ended at 10% upper circuit at Rs 47.55. The stock gained for the sixth consecutive session, giving returns of more than 60% in the last six sessions and more than 90% in the previous one month.
Jet Airways (India) surged nearly 9% with a near 14-fold increase in trading volume. More than 3.49 crore shares exchanged hands on the BSE and the NSE, compared with 30-day average volume of 25.08 lakh shares. The scrip has risen nearly 40% in last one month.
Sector analysts said aviation companies have directly benefitted from lower fuel costs following a significant fall in global crude oil prices. Aviation turbine fuel or fuel costs account for about 40-50% of total operating expenses of airlines.
The fall in fuel costs also led to an increase in the passenger load factor. India’s domestic air traffic grew by a healthy 18.66% on year to 67.60 lakh passengers in August, DGCA data showed . SpiceJet posted a passenger load factor of 92.1% in August.
“Domestic passenger airline traffic in India has been growing in healthy double-digits over the year. During this phase, the business models of Indian airlines evolved — Jet Airways increased its focus on the overseas segments (post its tie-up with Etihad) while new entrants such as AirAsia have been cautious in their expansion plans,” JP Morgan analysts Aditya Makharia and Sagar S Sanghavi had said in their note on August 5.