The Hindu Business Line : Rising crude price grounds aviation stocks

Kolkata, Jan. 5 Airlines stocks – which have been flying high on substantial reduction in price of aviation turbine fuel (ATF) and expectation of an increase in air travel – on Monday ended their flight as the companies announced steep cuts in fares and crude prices moved up during the trading session.

The three listed aviation companies – Jet, Kingfisher and Spicejet – have announced fare cuts ranging between 10 and 40 per cent on domestic routes.

ATF fall

According to Mr Ajay Jaiswal of Microsec, price of aviation turbine fuel has seen a downward correction of around 45 per cent from its peak in August.

On December 31, oil marketing companies cut aviation turbine fuel prices by 6.8 per cent, their eighth straight reduction since September. Now the rate has been cut to Rs 30,457 for every kilolitre. Airlines were also given time for clearing dues.

Jet fuel prices, which make up half of airlines’ operating costs, have steadily fallen to under half of their August peak of Rs 71,028 a kilolitre, but the loss-making airlines have only just begun passing the cuts to customers.

Domestic traffic declined nearly 3 per cent between January and November, compared with growth of 32.5 per cent in 2007.

Jet had a market share of 26.7 per cent in November, while Kingfisher (along with Air Deccan) had a share of 25 per cent. SpiceJet had 11 per cent.

The current rates are expected to bring domestic travellers to airlines and indirectly reduce losses.

Cut stops here

Analysts have ruled out the possibility of further rate cuts in the near future.

“Current ATF price does not leave much room for manoeuvrability,” an industry insider said.

Stocks’ flight

Jet Airways on Monday declined by 1.31 per cent to Rs 204. This came after a sustained gain of over 50 per cent in the past month. The stock had outperformed the market over the past month till December 31, rising 56.47 per cent as compared to the Sensex’s 6.1 per cent rise.

Kingfisher Airlines finished down 1.16 per cent at Rs 42.55. The stock has, however, showed a monthly gain of 53.61 per cent.

SpiceJet dropped to Rs 17.15, showing a loss of 3.11 per cent. The stock still reported a gain of 43.16 per cent on the BSE over the past month.

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