Will Airline Stocks Remain Choppy In 2021?

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Will Airline Stocks Remain Choppy In 2021?
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- After the government increased caps on the lower and upper ends of the price bands that airlines are allowed to charge passengers, Spicejet Ltd (BO: SPJT ) and Interglobe Aviation Ltd (NS: INGL ) (Indigo Airlines) stocks saw an uptick in their prices. However, both stocks have since lost ground.

SpiceJet is currently trading at Rs 88.5 after hitting Rs 91.4 on February 12. Interglobe is at Rs 1,598 after hitting Rs 1,653 on February 12. The reason for this is a slow Q4 of FY21. The period between January to March has traditionally been a slow one for airlines. Corporate travel is down during these months.

This year, the situation is even worse considering a lot of offices are still in work-from-home mode. BCG'sWorkplace of the Future’ survey showed that around 40% of companies will continue to work from home even after the pandemic blows over.

There are still a lot of restrictions on traveling to India from outside the country. The aviation industry is dependent on domestic tourists this quarter which will not make up for the empty seats from the corporate sector.

The icing (literally) on the cake has been an increase in oil prices. Fuel expenses accounted for around 23% of total expenses for SpiceJet and Indigo Airlines. Crude oil was trading at $48 at the end of December 2020. It is now trading at $61.6. The rise in fuel prices will offset any gains from the increased price band and capacity addition.

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