Saturday, January 02, 2016

Aviation stocks at new high on cut in turbine fuel prices

Mumbai:  Shares of the three listed aviation companies zoomed on Friday with gains of 10-14 per cent intraday after oil marketing companies slashed aviation turbine fuel prices by 10 per cent, the fourth consecutive monthly cut. While shares of Jet Airways and SpiceJet touched fresh 52-week highs, newly-listed InterGlobe Aviation hit a new high.
With the latest cut in prices, ATF rates are now at the lowest in the last five-and-a-half years. The cost of fuel (ATF) constitutes around 32 per cent of total costs at aviation companies. With Goldman Sachs seeing crude prices falling further to $20 in 2016, from around $37 now, the rally in aviation stocks seems sustainable.

Also, the general improvement in economic activity and companies passing on the benefits of lower costs to passengers will help grow the topline of these companies. According to the latest data available on the Directorate General of Civil Aviation website, during January-November 2015 domestic airlines ferried 7.33 crore passengers as against 6.09 crore in the corresponding period of the previous year; this is a growth of 20.41 per cent.

November saw a month-on-month growth of close to 25 per cent, the highest since July.
01/01/16 Business Line
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