 "Indigo")
Stock prices of airlines touched multi-year highs on Friday, on the back of a 10 per cent cut in the price of jet fuel. The shares of Jet Airways and SpiceJet closed at five-year and seven-year highs, respectively.
State-owned oil marketing companies revised jet fuel prices from Thursday midnight to Rs 39,892 a kilolitre in Delhi, the lowest since June 2010.
On a year-on-year basis, these have declined 24 per cent due to a drop in crude oil prices, resulting in more profits for airlines. Jet fuel prices have been on a decline since last June.
On Friday, airline stocks IndiGo, Jet and SpiceJet reacted positively to the latest cut and were up nine to 10 per cent in intra-day trade, before shedding some gains. SpiceJet closed 7.1 per cent higher at Rs 82.35, a seven-year high. Jet closed 8.3 per cent higher at Rs 760.60, a five-year high. IndiGo was up 8.7 per cent to end at Rs 1,341.75, an all-time high since its listing in November 2015.
Year 2015 has been a positive year for airline stocks. SpiceJet's gained a little over 300 per cent and the Jet stock rose 82 per cent. IndiGo's has gained 75 per cent from its Initial Public Offer price of Rs 765. Fuel costs account for 30-35 per cent of an airline’s operating expenses, down from an earlier 40-plus per cent. Domestic airlines pay more for fuel than their regional peers, owing to state and central levies.
International Air Transport Association expects a 10 per cent growth in collective profit of all airlines globally, to touch $36.3 billion in 2016. This will be aided by lower fuel costs and growth in demand, it said last month. For 2015, IATA has done an upward revision in the estimated profit figure to $33 bn from an earlier one of $29.3 billion.
