Airline stocks gain after DGCA allows higher fares, SpiceJet up 4%


DGCA has increased the minimum fare on all seven sectors by 10-12 percent and raised the limit on maximum fare by around 30 percent, as per the government order.

The share price of SpiceJet jumped over 4 percent and that of Interglobe Aviation, which operates IndiGo, gained over 2 percent on February 12,  a day after the Directorate General of Civil Aviation (DGCA) allowed airlines to charge 10-30 percent more for domestic flights with immediate effect.

The government revised the floor and ceiling price for fares that airlines can charge and the cap will be effective till March 31 as it capped the airline capacity as well. The cap was put in place after the airlines resumed operations in May after weeks of lockdown.

DGCA has increased the minimum fare on all seven sectors by 10-12 percent and raised the limit on maximum fare by around 30 percent. The seven sectors have been classified on the basis of the duration of flight, a CNBC-TV18 report.

Also read: What the fare cap and capacity limit extension mean for airlines, explained

The order comes at a time when airlines are staring at a traditionally weak quarter of January-March along with uncertain demand sentiment. Domestic air traffic on February 10 was at 67 percent of the average daily domestic traffic seen in 2019.

The revised fares come as a respite to the airline industry, which has been battered by COVID-19 restrictions. SpiceJet posted a standalone loss of Rs 56.95 crore for the quarter ended December 2020 amid limited operations and muted demand. The profit in the corresponding period was at Rs 73.2 crore.

On the other hand, Interglobe Aviation reported a consolidated net loss of Rs 620 crore for the quarter ended December 31, 2020, against a profit of Rs 496 crore in the corresponding quarter a year ago. The company’s revenue for the quarter fell 50.6 percent YoY to Rs 4,910 crore against Rs 9,932 crore in Q3 FY20.

Brokerage firm Prabhudas Lilladher has increased IndiGo’s FY22/FY23 earnings by 7.5 percent/ 7.1 percent and assigned an accumulate rating with the target price of Rs1,780, given sustained scaling up of operations, broad- based recovery in domestic demand aided by non-metro cities and improving load factors on the back of rising consumer confidence.

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