Mumbai: Despite negative news for the aviation sector in monthly passenger traffic growth, some aviation stocks rose sharply in backdrop of Jet Airways brewing financial and operational troubles, rivals are likely to gain market share for the time being.
According to IndiaNivesh aviation monthly bulletin, "In February 2019, the Indian aviation industry reported its lowest monthly passenger traffic growth since January 2015. Also slower traffic growth and higher crude—a cause of concern."
But stocks of airline companies on Friday rallied up to 7 per cent on the BSE even as Director of Civil Aviation (DGCA) data showed a slowdown in air passenger traffic in February.
The stock of SpiceJet zoomed 7.04 per cent to Rs 98.10. Intra-day, it rose 14.23 per cent to touch a high of Rs 104.70. InterGlobe Aviation closed the counter with 0.28 per cent gains at Rs 1,426.85. During the day, it was trading at Rs 1,459.30, up 2.56 per cent. Similarly, cash-strapped airline Jet Airways advanced 3.60 per cent to settle at Rs 225.85.
As per a DGCA report released on Wednesday, the number of passengers flying domestic airlines dropped to 11.3 million in February compared to 12.5 million in January.
"While Indigo and SpiceJet have gained market share, we believe that with so many cancellations (Indigo already announced 130 flights cancelled per day of the 1,300 they fly daily, till Mar19, and of course Jet Airways cancellations), the traffic growth for Mar'19 may turn negative," analysts from IndiaNivesh said.
With Jet Airways facing issues with their operations, SpiceJet and IndiGo gained market share for the month of February 2019. The aviation turbine fuel (ATF) price increased by 8 per cent month on month.
The yields continue to be strong despite more than 17 per cent correction in fuel costs compared to third October-December quarter of FY19. With two of the three factors impacting earnings remain in favour of the industry, we continue to recommend on the aviation industry with SpiceJet as our top bet in the sector, IndiaNivesh analysts said.
