Aviation stocks soared higher on Wednesday’s intraday trades after Wadia group-owned airline Go First, on May 02, 2023, voluntarily filed for bankruptcy with the National Company Law Tribunal (NCLT), blaming the situation on Pratt & Whitney for supplying faulty engines.
The surprise move can prove to be beneficial for its rivals like Spice Jet and Interglobe Aviation which appreciated to the tune of 8%. On the other hand, shares of Central Bank of India took a beating on Wednesday’s morning trades, due to its exposure to the airline.
As per data for March this year, Interglobe Aviation owned Indigo remained the market leader with a 56.8 percent market share, followed by Vistara with 8.9% and Air India with 8.8%. Go First had a 6.9 percent market share as of March, followed by SpiceJet at 6.4 percent. With Go first out , this share will be available for the other players in the market.
Interglobe Aviation’s share price shot up 8.20% to reach a fresh 52-week high of ₹ 2,236.95 on the National Stock Exchange (NSE). At 12:36 PM, the company’s shares were trading 4.95% higher at ₹ 2169.75 apiece.
According to Bank of America (BofA), Indigo’s competitive position has improved and it is well positioned to take advantage of the opportunity presented by the domestic market. It has given a target price of ₹ 2700 on the stock. This translates to an upside of 24.44%.
It appears that the aviation industry in India is heading towards a duopoly structure, with Indigo and the Tata group (Vistara and Air India) accounting for nearly an 80% market share.
According to Credit Suisse, Go First’s bankruptcy filing will add to tailwinds for Indigo, as it will benefit in terms of market share, stronger yields in a capacity constrained environment, and increasing leverage with global OEMs of engines and planes. It has an ‘outperform’ rating on the stock with a target price of ₹ 2,450 which indicates an upside of 12.92%.
Written by Simran Bafna
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