Stocks

Fears of shrinking margins ground aviation stocks

Our Bureau Mumbai | Updated on March 12, 2018 Published on February 25, 2011

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Aviation stocks bounced back on Friday after touching a 52-week low on Thursday. Fears of surging crude oil prices with the ongoing crisis in West Asia, led to a free-fall in the stocks, but with oil prices cooling off slightly and renewed investor interest, the stocks went up on Friday.

New-Delhi-based low fare carrier SpiceJet's stock rose the most to finally close at 7.40 per cent up at Rs 39.90. Mr Naresh Goyal-owned Jet Airways gained 5.91 per cent to close at Rs 419.40, and Dr Vijay Mallya owned-Kingfisher Airlines closed up 3.37 per cent at Rs 38.35.

On Thursday, SpiceJet's stock had fallen 10.59 per cent to close at Rs 37.15. Jet fell 6.02 per cent to close at Rs 396, and Kingfisher Airlines closed down 4.99 per cent to Rs 37.10.

Prices cool off

“There was fresh buying seen in the stocks on Friday as the negative sentiment on high oil prices cooled off a bit. Also, the spurt in oil prices is not driven by demand but due to the crisis in Middle East, which people expect is a short-term phenomenon and prices will come down once the situation improves,” said ICICI Direct.com's Research Analyst, Mr Rashesh Shah.

However, market analysts said rising aviation turbine fuel prices on the back of high crude oil prices and scare of depleting margins for airline companies led to a “panic selling” in the stocks.

“ATF prices skyrocketed and the fear that it will lead to decreasing margins for the airline companies led to wide spread selling in the aviation stocks,” said Angel Broking's Aviation Analyst, Mr Sharan Lillaney.

ATF hike

The airlines have also started passing on the ATF price increase burden to the passengers. Jet Airways had announced it will be increasing fuel surcharge again from February 26. In the first week of January, domestic airlines — Jet, Kingfisher Airlines and Air India had increased fuel surcharge. Indian oil marketing companies have been increasing ATF prices with global crude oil prices going up. Since January 1, ATF prices have risen by 11 per cent.

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Published on February 25, 2011
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