SpiceJet moots fare hike, hits 2-yr low; IndiGo slips 4% amid rising fuel

Aviation Turbine Fuel (ATF) prices, typically account for 40 per cent of an airline's cost, have been hiked to Rs 141,232.87 per kilolitre in Delhi, an all-time high.

Shares of aviation companies were under pressure as InterGlobe Aviation, which operates IndiGo airlines, and SpiceJet slipped up to 6 per cent on the BSE in Thursday’s intra-day trade amid concerns of weak earnings due to rising fuel prices and falling rupee against dollar.

SpiceJet hit a two-year low of Rs 41.60, down 6 per cent on the BSE in Thursday’s trade on the back of heavy volumes. The stock of the aviation company was trading lower for the fourth straight day, down 12 per cent during the period. It was quoting at its lowest level since June 2020.

At 11:13 am; SpiceJet was trading 4 per cent lower at Rs 42.10, as compared to a 0.17 per cent rise in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 2.9 million equity shares having changed hands on the NSE and BSE.

IndiGo was down 4 per cent at Rs 1,662 on the BSE. The stock had hit a 52-week low of Rs 1,556.25 on March 8, 2022.

Aviation Turbine Fuel (ATF) prices have been hiked to Rs 141,232.87 per kilolitre in Delhi, an all-time high. ATF prices typically account for 40 per cent of an airline’s cost. But since the beginning of this year, jet fuel prices have increased every fortnight.

In the nine hikes since January 1, ATF prices have increased by Rs 49,017.8 per kl (Rs 49 per litre) or nearly 55 per cent.

SpiceJet boss Ajay Singh on Thursday pitched for an increase in airfares as jet fuel prices have been hiked by almost 16 per cent.

“The sharp increase in jet fuel prices and the depreciation of the rupee have left domestic airlines with little choice but to raise fares immediately, and we believe that a minimum 10-15 per cent increase in fares is required to ensure that cost of operations are better sustained,” Business Standard reported quoting Ajay Singh. CLICK HERE FOR MORE

Meanwhile, SpiceJet is yet to announce its January-March quarter (Q4FY22) results. The company has postponed its quarterly results and board meeting scheduled on May 30, due to ransomware attack on the company’s IT systems which has affected the completion of the audit process within the stipulated time. The company had said it is taking the corrective measures with assistance of cyber experts and authorities on the issue.

Besides, analysts at Elara Capital remain positive on IndiGo, given the company’s strong balance sheet, market leadership with a 55 per cent domestic share that would help it to capture most domestic demand growth, strong GDP support and ramp-up of high margin international travel, which is expected to be around 40 per cent of IndiGo’s capacity after five years vs 25 per cent during FY20.