Airline Stocks Rise Following Jet Fuel Price Cut In Delhi; Here Are The Latest Rates

Jet fuel prices in the national capital witnessed a significant drop effective from January 1. ATF prices in Delhi were cut to Rs 1.01 lakh per kilolitre (kl) from Rs 1.06 lakh. State-owned giants Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, who collectively control the pricing, recalibrated the rates based on the average international price in the preceding month.

The aviation sector had endured a relentless surge in aviation turbine fuel (ATF) prices throughout the latter half of the previous year. The much-awaited respite came in November 2023 as global crude prices started to cool off. ATF constitutes a substantial chunk of an airline's operational expenses, often necessitating fare adjustments to offset the impact of increased costs.

The regular revision of ATF prices is a standard industry practice influenced by factors such as the average rate of the international benchmark and foreign exchange rates. These adjustments, occurring monthly, play an important role in shaping the overall operational expenses of airlines, either easing the financial burden or exacerbating the challenges they face, depending on the direction of the change.

Shares of key players in the aviation market responded positively to the news. At 12:15 pm, Interglobe Aviation's shares were up by nearly 1%, while SpiceJet experienced a gain of 1.8%. IndiGo, the nation's largest airline and one of the two listed airlines saw its shares quoted at Rs 3,019.60 per share on the NSE, whereas Spicejet was quoted at Rs 61.20 per share on BSE.

For IndiGo, the impact of fuel prices is substantial, with fuel expenses accounting for 37.15% of total expenditure. In the first quarter of the fiscal year 2024, the airline expended Rs 5,228 crore on fuel. Despite this, the company posted a profit of Rs 188.9 crore for the quarter ended September, a remarkable turnaround from the net loss of Rs 1,583.33 crore in the same period the previous year. The revenue from operations for IndiGo surged by 19.5% to Rs 14,943 crore.

SpiceJet, on the other hand, reported a narrowed net loss of Rs 449 crore in the September quarter, compared to Rs 830 crore in the corresponding period of the previous year. However, consolidated revenue from operations witnessed a 27% year-on-year decline, settling at Rs 1,429 crore. Despite these challenges, SpiceJet is actively pursuing opportunities for growth, as evidenced by its bid to acquire Go First, which is currently undergoing insolvency proceedings.

The positive market response and the financial performance of key players suggest that the sector is adapting to the dynamic landscape, and finding ways to thrive despite ongoing challenges. Passengers can also anticipate potential relief in airfares, making air travel a more affordable and attractive option in the coming months.