The Hindu Business Line : Airline stocks fall under fears of another hike in ATF prices

Mumbai, June 27 Stock prices of airline companies fell on Friday amidst fears of the latest hike in oil prices likely to impact cost of aviation turbine fuel or ATF, yet again. The stocks of three listed companies Jet Airways, Spicejet and Deccan Aviation were down by 5-8 per cent. Crude oil price on Friday touched its record high of $141.72 per barrel.

According to market analysts, another rise in ATF prices means higher operating cost for the companies. Currently, fuel cost contributes between 40 and 50 per cent of the overall operating cost for domestic airline industry.

Bearish Sentiment

“Though the share prices of airline companies were in line with the overall bearish sentiment in the stock market, the increase in oil prices eats into the profits of these companies directly. Already some oil companies have indicated a probable increase in ATF prices from July,” said Mr Hitesh Agarwal, Angel Broking’s Head of Research.

He added, “With no signs of oil prices cooling down any time soon, the situation is only going to get worse and the entire airline industry is likely to be under pressure throughout the current financial year.”

Double whammy

Analysts said, it is a double whammy for the companies as their volumes are falling with the continuous increase in air fares given the rise in fuel surcharge and the operating costs are going only Northwards.

Jet Airways stocks closed down 5.27 per cent at Rs 490.60 on Friday. The Delhi-based low-cost carrier Spicejet’s share price closed down 5.64 per cent at Rs 25.95. Deccan Aviation was down 8.17 per cent at Rs 69.65.

More Stories on : Airlines | Petroleum | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page