Airline shares rally; IndiGo hits new high since listing

Jet Airways surged to its fresh 52-week high of Rs 602, while SpiceJet rallied 8% to Rs 68.20 on the BSE in intra-day trade.

Shares of airline companies -- InterGlobe Aviation, Jet Airways (India) and SpiceJet -- have moved higher by up to 10% in late noon deals, extending  gains for the third straight session, as crude oil prices continued to remain soft.

On Monday, Brent and US crude futures fell by as much as 4% to their lowest levels since the start of the 2008 financial crisis, before paring losses on some short-covering.

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After the fall in crude oil prices, the oil companies may reduce the price of air turbine fuel (ATF), reports say. Oil price is an airline’s biggest cost component (40-50% of total costs).

InterGlobe Aviation-operating the 'IndiGo' brand, has rallied 10% to Rs 1,197 on the Bombay Stock Exchange (BSE), also its highest level since listing in November this year.

Harshad Borawake & Rajat Agarwal, analysts at Motilal Oswal Securities recommended “Buy” rating on InterGlobe Aviation stock with a target price of Rs 1,478.

“IndiGo is the only airline in India to be profitable for the last seven years and we believe this sustainable advantage is due to its unique fleet strategy, which significantly reduces its aircraft ownership cost and makes it the lowest-cost operator,” analysts said in a report dated December 10, 2015.

Analysts estimate EBITDA/PAT CAGR of around 44% over FY15-18 (EBITDA margin expansion of around 900 basis points), led by continued fleet addition (94 to 154) and passenger CAGR of 21% (load factor at >80%).

Among the other individual stocks, Jet Airways (India) too surged to its fresh 52-week high of Rs 602, up 6% on the BSE, while SpiceJet surged 8% to Rs 68.20 on the BSE in intra-day trade.