Aviation stocks rally on ECLGS 5.0 relief; IndiGo, SpiceJet rise up to 8%

IndiGo, SpiceJet shares gained on Wednesday after govt approved ECLGS 5.0 to support airlines amid West Asia crisis. Analysts said fuel costs, traffic slowdown remain key risks for the aviation sector

IndiGo, SpiceJe share price rally on ECLGS 5.0 

Airline stocks – InterGlobe Aviation, and SpiceJet – were trading higher on Wednesday after the Government gave nod to the fifth edition of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) to support airlines amid West Asia crisis.  Additionally, report that the US and Iran were close to signing a preliminary agreement to end the ongoing West Asia war and restart diplomatic engagement boosted sentiment. Hopes that a truce between the US and Iran, as reported by Axios, lifted hopes that oil prices may fall, containing aviation fuel prices, and normalise air travel.

 

 

  On the bourses, IndiGo shares jumped 7.6 per cent, while SpiceJet shares were locked in the 5-per cent upper circuit. By comparison, the BSE Sensex index was up over 960 points or 1.26per cent at 3 PM.

 

ECLGS 5.0 scheme for airlines

Meanwhile, the ₹18,100-crore corpus of the emergency credit scheme will aid micro, small and medium enterprises (MSMEs), airlines and other businesses in meeting working capital needs, the Union Cabinet said.  The government’s emergency credit initiative is designed to support struggling industries, specifically micro, small, and medium enterprises (MSMEs) and the aviation sector. This programme ensures these businesses have the cash flow necessary to keep their daily operations running smoothly.

 

Through this scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will provide a government-backed safety net, covering 90 per cent of any potential losses on new loans issued to airlines. Due to the severe financial pressure on the industry, airlines can borrow up to 100 per cent of their funding needs, capped at ₹1,500 crore per company, the Union Cabinet said.

 

Notably, this move comes shortly after the Federation of Indian Airlines (FIA) alerted the government that the sector is facing a “total collapse”. The FIA attributed this crisis to a combination of regional instability in West Asia and a massive spike in the cost of jet fuel.  Check - TOP GAINERS NSE | TOP LOSERS NSE

Air traffic slows in March, April

Operationally, domestic air traffic slowed by 1 per cent Y-o-Y in March 2026 to 14.4 million, impacted by higher airfares amid the ongoing geopolitical volatility, with April also witnessing similar softness. Air traffic for the month is down 2 per cent Y-o-Y.

  Airlines passenger load factor (PLFs) declined during the period, while cancellations inched up.  

Individually, SpiceJet reported the highest monthly downtick of 6.2 per cent, resulting in March 2026 PLF of 82.8 per cent. IndiGo followed suit and reported M-o-M decline of 6.1 per cent with PLF down to 83.5 per cent. 

  Meanwhile, IndiGo’s flight cancellation rate increased to 0.27 per cent in March from 0.13 per cent in February 2026. SpiceJet recorded the highest cancellation rate at 1.92 per cent.

 

Fuel costs biting airlines

Despite benchmark rates indicating a 15-20 per cent hike in aviation turbine fuel (ATF) prices for scheduled domestic operations for May 2026, driven by higher crude prices and currency depreciation, PSU oil marketing companies (OMCs) have kept ATF prices unchanged at ₹104.9/ltr (in Delhi) for the month.  

ATF prices for international operations, however, were increased by ~5 per cent. 

  Analysts at Emkay Global Financial Services believe the move to keep ATF prices unchanged for March 2026 “offers significant relief to airlines”, especially after the Federation of Indian Airlines (FIA) warned that rising fuel costs (now ~55-60 per cent of operating expenses vs 30-40 per cent earlier) could make operations unviable and lead to groundings. 

  Meanwhile, those at Ambit Capital said that consensus earnings estimate is yet to factor in the full impact of fuel cost inflation and its impact of FY27 earnings for the aviation sector. 

  “We build in crude at $82/bbl and USD/INR ~93 for FY27-28, leading to ~22 per cent/3 per cent cut in FY27/28 EPS estimates for IndiGo,” the brokerage said in its April 29 report.

  From a long-term lens, however, the brokerage has a ‘Buy’ rating on the stock owing to long-term international expansion plans (over 600 aircraft by CY30), backed by expansion into international long- and mid-haul destinations, plus established domestic market share.

  All of this, it believes, will drive the next leg of growth for IndiGo.

  “Focusing on underserved international routes will drive yields and increase market share in the long term. We expect IndiGo to post 15 per cent revenue and 28 per cent Ebitda CAGR over FY26-29,” it said.

  Ambit Capital has a one-year share price target of ₹5,300 on the stock.    =====================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.