Jet, SpiceJet scrips fall on news of discount pricing

NEW DELHI: Shares of Jet Airways and SpiceJet, which had gained last week on FDI hopes, tumbled today on news about discount pricing initiated by Jet Airways and Air India, which analysts think could trigger highly competitive pricing in the aviation sector, thereby impacting the financials of all airlines.

While the Jet Airways scrip fell by 2.77% to Rs 357.5, SpiceJet tumbled 3.32% to end the day at Rs 36.45.

According to analysts, news reports about the Naresh-Goyal owned Jet Airways and state carrier Air India rolling out up to 40% discount on advance booking right ahead of the festival season caused the stocks to take a hit.

"It is a bad time to roll out such cheap tickets, especially when the airlines have made money for the first time in so many quarters. This move is going to impact the financials of airlines as we foresee highly competitive airfares ahead," Sharan Lillaney, analyst at brokerage firm Angel Broking said.

Travel experts also think that following this move, even budget carriers will not remain far behind and are bound to introduce discounts, without saying it out loudly.

"Low cost carriers may also have to fall in line and offer discounts as they would like to maintain the price differential with full service carriers. This is a strategy of cashing in on festival demand," one of the largest travel portals of the country, Yatra.com's Sunny Sodi, Vice President (Air Product) said.

The stocks also fell due to news reports about the Mumbai airport seeking a tariff revision of over 600%, on lines of the Delhi airport as it will increase costs for airlines further, Lillaney said, adding that if airlines make losses this quarter, the stocks could fall further.

Last year, highly competitive fares led airlines to under-price tickets leading to huge losses.