Aviation company stocks are facing quiet a turbulence with steady fall in passenger load factor as various state governments levy fresh restrictions on travel and enforce strict testing amid rising Omicron cases.

Shares of InterGlobe Aviation closed 0.70 per cent lower at ₹1,962.80 on the BSE. They had dipped nine per cent since October. SpiceJet and Jet Airways stocks slipped 1.36 per cent at ₹66.30 and seven per cent since October. Jet Airways, however, closed higher at ₹88.75 on Thursday but slipped six per cent from October value.

Double whammy

Despite weak fundamentals in the short-term, steady buying at the lower level with long term prospect has been holding the airline companies shares from crash landing.

Vinod Nair, Head of Research at Geojit Financial Services, said airlines booking in January was down by almost 20-25 per cent due to rise in Omicron cases while the load factor has gone below 80 per cent during the festival season (December quarter) with 10 per cent drop in passenger travel during Christmas week. This apart, he said airlines will be forced to cancel or merge flights due to falling load factor.

Airlines companies are already bleeding due to the double-whammy of rising cost and fall in ticket bookings. Net loss of InterGlobe Aviation in the first half of this fiscal widened to ₹4,612 crore against ₹4,043 crore logged in the same period last year even while its revenue more than doubled to ₹8,969 crore (₹4,173 crore). Operational cost zoomed to ₹13,579 crore (₹8,210 crore) in the same period.

Similarly, SpiceJet net loss jumped to ₹1,302 crore (₹706 crore) in the first half of this fiscal, while the revenue increased 55 per cent to ₹2,470 crore (₹1,592 crore).

Vinit Bolinjkar, Head of Research, Ventura Securities, said,“Over the next three years, demand will be fuelled by addition of new airports in smaller towns. Investors should be nibbling shares of Interglobe Aviation to increase their allocations to the sector,” he added.

Passenger traffic

Domestic passenger traffic recovered gradually in June after restrictions were eased with drop in Covid cases. However, with the recent sharp spike in cases, travel restrictions are being reimposed.

Ankit Pareek, Research Analyst, Choice Broking, said aviation industry will continue to face hurdles in revival in this year considering the threat over rising fuel prices and the third Covid wave impacting financial health of overall sector. New entrant in airline, government support to the sector, crude oil prices and control of Covid situation should be key factors in this year, he said.

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