Aviation stock: Cost pressures continue to take a toll on profitability

Cost pressures in competitive environment continue to take a toll on profitability

Aviation stocks were among key gainers on Monday on expectations that falling crude oil prices and strengthening rupee will improve profitability. While SpiceJet gained nearly 20 per cent, Jet Airways and InterGlobe Aviation were up 7.7 per cent and 2.4 per cent, respectively. 

While fuel accounts for about 35 per cent of sales, a stronger rupee in addition to lower fuel costs helps bring down costs related to maintenance and rentals. 

Analysts say a 10 per cent increase in crude oil prices has a 3.5 per cent impact on profitability, both at the operating profit and profit before tax levels.