Mumbai: Shares of SpiceJet and Interglobe Aviation, the parent of IndiGo, have been flying high so far this year, barring some hiccups for the latter due to a spate between the co-promoters. However, the stocks have largely outperformed the benchmark.

For the year to date, while Sensex is up a mere 1.12 per cent, shares of SpiceJet and InterGlobe have jumped 47.42 per cent and 38.84 per cent, respectively.

On the other hand, Jet Airways which grounded its operations on April 17 as it ran out of cash, has eroded 88.17 per cent of stock value so far this year.

“With the demise of Jet Airways, all the other competitors have gained, but economies of scale and efficient operations are primarily benefitting the larger players, IndiGo and SpiceJet,” said Ajay Bodke, CEO and Chief Portfolio Manager (PMS) at Prabhudas Lilladher.

Rivals have also been taking up aircrafts that were formerly operated by Jet from its lessors, and have recruited many of its pilots, cabin crew and other staffers.

“They are both operating at high yields, and so they have the pricing power. In addition to higher utilisation levels, crude prices have remained range bound. ATF (air turbine fuel) prices are in check, so, operating costs are also under control, and that leads to swelling of bottom line,” Bodke said.

Crude oil prices account for roughly 30-50 percent of an airlines’ operating costs, and with those in control, it provides a huge relief to the fuel-guzzling airline business.

In June, SpiceJet’s passenger traffic grew 36.9 per cent year-on-year to 1.88 million, while IndiGo’s passenger traffic grew 23.7 per cent to 5.78 million.

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“Pricing power is relatively good on the back of favourable supply demand cycle and Jet grounding. Crude oil prices are also stable. However, depreciating rupee is an incremental headwind” said Ansuman Dev, an analyst at ICICI Securities. ICICI Securities have a “buy’ rating on Spicejet as well as Indigo.

Shares of InterGlobe have stumbled since July due to a spat between co-promoters Rahul Bhatia and Rakesh Gangwal.

Separately, foreign institutional investors (FIIs) and mutual funds (MFs) hiked stakes in the two airlines in June quarter.

SpiceJet saw FII and MF stakes rise by 50 basis points each to 4.8 per cent and 7.5 per cent respectively, while InterGlobe Aviation saw FII and MF holdings rise by 60 and 10 basis points to 15.6 per cent and 5.1 per cent, respectively.

IndiGo parent InterGlobe Aviation saw its profit after tax zoom to Rs 1,203.1 crore for the three months ended June 30. The company had reported a profit after tax of Rs 27.8 crore in the year-ago period. In June quarter, revenue from operations jumped nearly 45 per cent to Rs 9,420 crore.

Peer SpiceJet reported its highest ever quarterly profit in the June quarter. The increase in yield was also aided by higher passenger traffic following the grounding of Jet Airways. The company’s stand-alone net profit rose to Rs 261.7 crore in June quarter from a loss of Rs 38.1 crore in the corresponding period of the previous fiscal year, the airline said.



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