Aviation stocks gain after govt increases cap on number of domestic flights

SpiceJet rallied 13 per cent to Rs 91.85 on the back of heavy volumes, while InterGlobe Aviation-run IndiGo gained 5 per cent to Rs 1,731 on the BSE

Shares of aviation companies were flying high at the bourses on Friday, rallying up to 13 per cent on the BSE, after the government lifted cap on domestic flights to 80 per cent of pre-Covid levels.

Following the news, SpiceJet soared 13 per cent to Rs 91.85 on the back of heavy volumes. A combined 16.7 million equity shares had changed hands on the counter on the NSE and BSE, till 09:50 am.

Shares of InterGlobe Aviation-run IndiGo airline gained 5 per cent to Rs 1,731 on the BSE. The stock was trading close to its 52-week high level of Rs 1,744, touched on November 20, 2020.

The cap on the number of domestic flights that Indian airlines are permitted to operate was increased from 70 per cent to 80 per cent of their pre-COVID levels on Thursday, said Civil Aviation Minister Hardeep Singh Puri. CLICK HERE TO READ FULL REPORT

Meanwhile, in the past one month, the stock zoomed nearly 90 per cent, as compared to 11 per cent rise in the S&P BSE Sensex. Last month, the US Federal Aviation Administration gave green-signal to fly Boeing 737 Max aircraft after two years of grounding.

SpiceJet continues to aggressively cut costs, re-negotiate contract terms and defer payments. A quick and aggressive expansion in cargo has led to better coverage of fixed costs and incremental contribution to cash flow during H1FY21. Analysts at Centrum Broking factor recovery in traffic to 83 per cent of FY20 levels in FY22 aided by strong domestic traffic recovery and market share gains in the international business. The stock however, trading above brokerage firm target price of Rs 89 per share.