IndiGo, SpiceJet dip up to 9.5% on no liquidity support, lockdown extension

Aviation stocks InterGlobe Aviation and SpiceJet tumbled as much as 9.5 per cent on the BSE on Monday after the government's Rs 20 trillion economic package failed to deliver immediate liquidity support to the bleeding airlines. Besides, the government has prohibited air travel till May 31 as part of the fourth phase of the nationwide lockdown.

Individually, InterGlobe Aviation, parent firm of India's largest airline (by market share) IndiGo, tanked 9.5 per cent to Rs 890 on the BSE, while SpiceJet was locked in the 5 per cent lower circuit band at Rs 43.45 apiece. In comparison, the benchmark S&P BSE Sensex was trading 725 points, or 2.33 per cent, lower at 30,372.86 level at 10:17 am.

Finance Minister Nirmala Sitharaman, on Saturday, said that India would rationalsie its air space for civil aviaiton purposes which, at present, is capped at 60 per cent. Besides, she said six airports will be privatised, private companies will make an additional investment of Rs 12,000 crore on 12 airports auctioned before, and tax structure will be rationailised for the Maintenance, Repair and Overhaul (MRO) industry. 

Airline executives, however, said that the government needs to help airlines with measures like deferring landing and parking charges and waiving off taxes and duties. Commercial passenger flights and airport operations are suspended since the nationwide lockdown was imposed on March 24, causing crores in losses.

“All these measures are long-term steps, the benefits of which if properly implemented, will be achieved may be five or six years down the line. But how many airlines will survive till then?” said an airline executive.

SpiceJet CMD, Ajay Singh, too, said he hoped for more support for the industry than what was announced.

Experts said the finance minister’s reforms were not concrete and airline promoters will have to infuse more cash to save their companies. Indian airlines, excluding market leader IndiGo, will need to at least $2.5 billion to survive the lockdown, according to research done by aviation consultancy firm CAPA.

According to Ashish Shah, research analyst at Centrum Broking, the government's expectations of saving Rs 1,000 crore annually by saving fuel would be based on pre-Covid-19 air traffic level.

"However, the actual savings would depend upon the speed with which the airlines are able to restore their operations at normal levels as government estimate of savings would likely have been estimated on such basis. Having said this, much more needs to be done for the industry given that the disruption has been severe and that air travel will take at least 12 months if not more to come back to normalcy," he said.

At 10:33 am, InterGlobe Aviaiton was quoting Rs 905.55 per share, down 7.95 per cent, while SpiceJet was still locked in the lower circuit. On Friday, the stocks had rallied on hopes of stimulus measures for the industry. While IndiGo had gained 2.4 per cent to Rs 996 in the intra-day trade, SpiceJet had frozen in the 5 per cent upper circuit band at Rs 45.7 per share.