IndiGo, SpiceJet hit lower circuit after govt suspends domestic flights

The move is part of the nationwide lockdown that the government has imposed to stem the spread of coronavirus. India had banned international flights for a week on March 20.

Aviation stocks including SpiceJet and InterGlobe Aviation-run IndiGo crash landed at the bourses today after the central government announced suspension of the domestic flights beginning the 23:59 hours of March 24 in the wake of coronavirus (Covid-19) outbreak. While SpiceJet was locked in the 5 per cent lower circuit at Rs 31.85 apiece on the BSE, IndiGo hit its 10 per cent lower limit at Rs 765.05 before recovering maerginally to trade 8.6 per cent lower at Rs 776.50.

"The operation of all scheduled domestic flights (except all-cargo flights) by any aircraft operator holding an air operator certificate issued by Directorate General of Civil Aviation (DGCA) shall cease with effect from 23:59 hrs. IST on 24 March, 2020. The restriction shall remain in force till 23:59 hrs IST on 31 March 2O2O," a government notification said.  

Besides, the notification added that the operation of flights by the holders of Non-scheduled operator permit (except all-cargo flights, off-shore helicopter operations, medical evacuation fliBhts or flights specifically approved by DGCA) and flights by private aircraft operators shall also cease with effect from 23:59 hrs. IST on 24 March, 2O2O. "Such operators shall plan their operations in such a way that their flights land at the destination latest by 23:59 hrs. IST on 24 March, 2020," it said.

The move is part of the nationwide lockdown that the government has imposed to stem the spread of coronavirus that threatens Prime Minister Narendra Modi’s attempts to revive the economy, which has already been expanding at the slowest pace in more than a decade. Earlier, India had banned international flights for a week on March 20.

PM Modi joined chief ministers in urging people to take the lockdown in 30 states and Union Territories seriously, even as 75 new cases of Covid-19 were dectected on Monday, taking India's total number of cases to 492 — more than double the number on March 20.

Studying the impact, analysts at JP Morgan said the airspace closure may persist for even longer basis the situation which may lead to a sharp decline in IndiGo June and September quarter earnings.

In the backdrop of the outbreak of coronavirus we revisit our air traffic growth estimates. Our base case is a sharp slowdown in Q1FY21 and recovery starting Q2FY21 leading us to estimate 9.2 per cent/4.2 per cent domestic/international pax growth for Indian airlines in FY21E, wrote analysts at Centrum Broking in a note.

While the analysts expect IndiGo's Q4FY20E earnings to be impacted by fx MTM loss of Rs 5.7bn (at Rs73.5/USD), they it’s robust balance sheet and competitive cost structure to put it in a

position of strength once growth recovers. The brokerage has 'Buy' rating on the stoock with a revised target of Rs 1,505.

Aviation is one of the worst affected sectors amid the Covid-19 crisis that has taken the scale of a pandemic. "According to the International Air Transport Association, airlines globally can lose in passenger revenues of up to $ 113 billion due to this crisis. Airfares have also come under pressure due to nearly 30 per cent drop in bookings to virus affected destinations. As a result, airfares to such destinations have fallen by 20-30 per cent," industry body Federation of Indian Chambers of Commerce & Industry (Ficci) said in its latest report.

"According to the data available with the Ministry of Civil Aviation, nearly 585 international flights have been cancelled to-and-from India between February 1 and March 6 because of the outbreak of coronavirus. Cash reserves of airline companies are running low and many are almost at the brink of bankruptcy," the report said.