1 day ago
IndiGo and SpiceJet Shares Slide as ATF, Crude Rise
Shares of IndiGo and SpiceJet fell after airplane fuel became more expensive.
Aviation Turbine Fuel, or ATF, rose by 5.46% to ₹121.28 per litre.
This was the second monthly increase in a row.
Global Brent crude oil prices also climbed to about $95.60 a barrel.
The articles linked the crude increase to tensions between the United States and Iran.
Fuel is one of the biggest costs for airlines, making up about 40% of their expenses.
Investors worry that higher costs could reduce airline profits.
Airlines may need better efficiency or higher ticket prices to offset the increase.
IndiGo operator InterGlobe Aviation and SpiceJet shares declined after domestic ATF prices rose 5.46%.
ATF prices increased by ₹6.28 per litre to ₹121.28 from ₹115.
The increase marked the second consecutive monthly ATF price hike, following a 7.5% rise the previous month.
Brent crude prices rose about 1% to $95.60 amid escalating tensions between the United States and Iran.
Fuel accounts for roughly 40% of airline operating costs, raising concerns about margins and ticket prices.
- Who
- Shares of InterGlobe Aviation, which operates IndiGo, and SpiceJet were affected.
- What
- Airline stocks declined after domestic ATF prices rose 5.46% and global crude prices increased.
- Where
- The stock moves occurred on Indian exchanges, while ATF prices varied across Indian cities.
- When
- The ATF increase was announced on Tuesday, and the stocks extended their decline on Wednesday.
- Why
- Higher jet-fuel and crude oil prices could increase airline costs and pressure profitability if higher expenses cannot be passed on through fares.
Cost-Pressure Concerns
Potential Cost Offsets
Effect on airline profitability
Cost-Pressure Concerns
Higher ATF and crude prices could weigh on airline margins because fuel represents about 40% of operating costs.
Potential Cost Offsets
Airline profitability could be protected if carriers improve operational efficiency or achieve higher passenger yields.
Passing costs to passengers
Cost-Pressure Concerns
Airlines may struggle to raise fares in a competitive market, limiting their ability to recover higher fuel expenses.
Potential Cost Offsets
Higher ticket prices could help airlines offset increased fuel costs, although the articles say this remains uncertain.
Investor outlook
Cost-Pressure Concerns
Continued energy-price volatility and possible supply disruptions are prompting caution toward aviation stocks.
Potential Cost Offsets
The impact could be moderated if energy prices stabilize or airlines successfully manage their operating costs.
Key facts
- ATF increase
- 5.46%, or ₹6.28 per litre
- New ATF price
- ₹121.28 per litre, up from ₹115
- Previous ATF increase
- 7.5% in the preceding month
- Airline fuel-cost share
- Approximately 40% of total operating costs
- Brent crude price
- About $95.60 per barrel after a roughly 1% rise
- InterGlobe Aviation move
- Declined 2.80% to ₹5,042 in early Tuesday trading; later reports said it fell over 3% to ₹5,055
- SpiceJet move
- Declined 1.9% to ₹10.12 in early Tuesday trading; later reports said it fell almost 4% to ₹9.60
Sources
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