The shares of SpiceJet Ltd. and Interglobe Aviation Ltd. which operates IndiGo Airlines were trading at their 52-week lows Friday morning. Both are low-cost airlines headquartered in Gurgaon, Haryana.
The stock of SpiceJet was trading at ₹ 40.05 per share as of 10:25 IST, down more than 48% year to date. Its 52-week price is ₹ 39.40 per share.
The share price of Interglobe Aviation, the only Indian airline with a healthy balance sheet presently trades at ₹ 1,633.70 per share, a fall of 19% from its year start price. It recorded its 52-week low of ₹ 1,555 on 8th March this year.
The troubled industry is set to get another blow from the ATF price hike of 16.3%. ATF or aviation turbine fuel accounts for almost 50% of the operational expenses of airline companies. The decision by oil marketing companies (OMCs) to increase the fuel price will prompt the companies to pass on the cost to customers in the range of 10-15%. According to some market insiders, the airfares are already up 50% on a year-to-year basis and may dampen the demand.
The industry had just bounced back from the Coivd-led disruption and was seeing pre-Covid travel numbers and increased bookings backed by leisure travel.
Further, the industry may be at the cusp of a price war led by an imminent increase in competition.
Bailed out by Murarilal Jalan and Kalrock Capital, Jet Airways (India) Ltd. has planned to resume flights in July-September quarter this year after receiving approval from the aviation ministry.
In conjunction with this, CCI recently approved Air Asia’s acquisition by Tata-owned Air India. This will result in capacity expansion for the carrier.
IPO-bound Go First plans to reduce its debt and increase its fleet count post its fundraise to the tune of ₹ 3,600 crores. As per its draft preliminary prospectus, Go First (called GoAir previously) had obligations of ₹ 8,160 crores as of April 2021.
Amidst the re-launch of various carriers, ace-investor Rakesh Jhunjunwala backed new-entrant Akasa Air took delivery of its first Boeing 737 Max aircraft. It has signed a proposal to purchase highly fuel-efficient 72 such Max planes. The carrier has deferred its launch to July-September quarter this year.
As multiple low-cost airline companies are looking to either revamp or launch their operations, the industry segment will experience intensified competition. Summing it up, travel industry insiders believe that carriers are in no position to absorb field hikes, and thus can not escape price increases. However, the extent of the increases will depend on the intensity of the competition in the industry.
Written by Vikalp Mishra
