India's airline stocks surge as crude prices fall

MUMBAI: India’s airline stocks soared on Thursday after a record fall in crude prices that will likely lead to a fall in rates of jet fuel, the biggest cost component for a local carrier.

Share prices of India’s second biggest carrier Jet Airways, soared 20% toRs 322.05 in the Mumbai markets, outperforming the Sensex which rose by just 0.90%. Rival low fare carrier SpiceJet rose 18.36% to Rs 18.24.

Earlier in the day, billionaire investor Rakesh Jhunjhunwala bought 7.5 million shares in SpiceJet, a source told ET. BSE data confirmed the quantum of shares in its block deal section.

The data showed the shares were bought at Rs 13.41 crore, or Rs 17.88 apiece. SpiceJet closed 18.36% up at Rs 18.24 on Friday.

In May, last year Jhunjhunwala’s wife Rekha had bought 25 lakh shares in the airline at an estimated value of Rs 10 crore. Marketmen attributed fresh buying to re-rating in airline stocks Jet fuel accounts for up to 45% of an airline’s expenses.

The fuel is sold at higher rates here than in other countries, thanks to high instances of state taxes. Brent crude on Thursday fell by $5.17 to $72.58 a barrel.

Prices of the Indian basket fell 5% to $72.52 a barrel, according to a statement from the petroleum and natural gas ministry.Analysts said Jet may have also got a fillip from credit rating agency ICRA’s upgrade on its loan facilities. The agency upgraded it to a BB or stable rating from C, which meant the airline was liable to default.

The upgrade was looking at Jet Airways’ slight improvement in finances as a result of funds from strategic partner Etihad Airways as well as its own plans to boost its weal health.

Etihad last year got into a deal with Jet to invest $600 million into it, by purchasing a 24% stake, a majority ownership of its customer privilege programme and flight slots at London’s Heathrow airport.