Airline stocks around the world gain 100-300%; SpiceJet top performer
MUMBAI: SpiceJet has become the world’s top-performing airline stock, surging more than four-fold over the past year, as the aviation industry benefitted from lower crude oil prices and a boom in passenger traffic.
The budget carrier promoted by Ajay Singh outperformed El Al Israel Airlines, Hawaiian Holdings, China Southern Airlines and Qantas Airways, which gained 100-300 per cent over the same period, according to Bloomberg data.
Shares of InterGlobe Aviation, the operator of IndiGo, which listed on November 10 after an initial public offering, have advanced 42 per cent so far. Investors are betting that aviation companies including SpiceJet will post healthy December quarter earnings as a fall in crude oil prices reduces fares and attracts more fliers.
SpiceJet shares were little changed at Rs 69.05 at the close on the BSE, coming off a 52-week high of Rs 72.50. The shares have rallied about 65 per cent over the past one month, while rival Jet Airways has gained 19 per cent over the same period. SpiceJet shares closed at Rs 15.68 on November 24 last year.
While SpiceJet’s management reiterated that the company’s shares are undervalued, analysts have become cautious after the stock’s recent gains.
“I would advise existing investors to book profits in phases in SpiceJet stock, while newcomers should avoid this company because the stock has already run up sharply,” said G Chokkalingam, founder and managing director of Equinomics Research & Advisory. “Some of the global airline stocks have seen re-rating because of lower jet fuel prices, while domestic airlines are benefiting from the fact that India is becoming the fastest-growing airline market.”
Analysts said the second half of this financial year is expected to be better for aviation companies, with traffic increasing due to festivals and vacations. Emboldened by a quick turnaround in fortunes under its new promoters, SpiceJet has initiated talks with aircraft manufacturers to place orders for at least 150 planes.
“As the airline is now returning to normalcy, the management is now clearly shifting focus to growth,” said Santosh Hiredesai, analyst, Edelweiss Securities. “The airline will continue to explore options to enhance fleet size and depth of operations across strategic markets and capitalise on the growing aviation market in India.”
Falling crude oil prices have helped ease the financial burden of cash-strapped carriers and raised hopes that the troubled sector can report profits in the December quarter. Brent crude oil prices traded at about $45-46 a barrel on Tuesday. Aviation turbine fuel constitutes more than 30% of an airline’s expenditure.
Read full article: Economic Times