Jet Airways, SpiceJet get a lift on sliding aviation fuel price

Tanya Thomas Mumbai | Updated on December 02, 2014 Published on December 02, 2014


ICRA’s rating on Jet, Jhunjhunwala’s buy in SpiceJet also help

The share prices of Jet Airways and SpiceJet have seen a lift over the past week due to positive developments, including the cut in air turbine fuel price.

Jet Airways zooms near 50%

Shares of Jet Airways have risen by almost 50 per cent in just one week, from ₹252.90 last Monday to Tuesday’s closing of ₹376.95, up ₹124.05. On Tuesday alone, the stock went up by ₹28, or 8.29 per cent.

Over the same period, SpiceJet rose from ₹15.68 a share to Tuesday’s closing of ₹20.90, up ₹5.22 or 33.29 per cent. However, the stock had a marginally choppy day on the bourses on Tuesday, reaching an intra-day high of ₹21.65 before ending the session 1.65 per cent lower.

(The exchanges suspended trading in the grounded Kingfisher Airlines, the third listed aviation stock, from December 1 for not reporting financial results.)

Much needed reprieve

The immediate trigger for the two stocks to simultaneously move up is the fall in prices of aviation turbine fuel by over 4 per cent this month, to ₹59,943 a kilolitre. Fuel bills account for nearly half of an airline’s operating costs, so a reprieve here will go a long way in propping up operating margins for airlines.

Additionally, late last month, ratings agency ICRA upgraded its outlook on Jet Airways’ long-term debt to BB from C, while the airline’s short-tem credit rating has been reaffirmed at A4.

ICRA’s rating rationale document attributes the upgrade to the “improvement in the liquidity and credit profile of the company, arising from improved operating performance as well as support from its strategic partner — Etihad Airways PJSC.”

Jhunhunwala’s buy

SpiceJet had some good news last week when celebrity investor Rakesh Jhunjhunwala’s Rare Enterprises bought 75 lakh of the airline’s shares in a ₹13.41-crore bulk deal last Friday, taking the stock up 16.5 per cent in a single session.

Shrikant Chouhan, Head — Technical Research, Kotak Securities, expects the benefits of cheaper fuel to continue. “As the price of crude falls and oil supply increases in general, jet fuel will also remain stable at current levels. The outlook for both these companies is positive — they have gone through long gestation, overhead costs are now falling and youth traffic in airlines is on the rise. Further re-rating is likely for both the stocks.”

Published on December 02, 2014
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