Spicejet, Jet Airways rally over 7% each as OMCs slash ATF prices

MUMBAI: Shares of airline companies such as Spicejet and Jet Airways surged in trade on Thursday, after the oil marketing companies announced cut in aviation turbine fuel (ATF) following sharp decline in global crude oil prices.

At 02:45 p.m.; Jet Airways was at Rs 416.60, up 8.43 per cent, on the BSE. It rallied 8.77 per cent to touch intraday high of Rs 417.90.

Spicejet was at Rs 18.15, up 5.52 per cent, on the BSE. It surged 7.5 per cent to touch intraday high of Rs 18.50.

ATF price in Delhi was cut by Rs 7,520.52 per kilolitre, or 12.5 per cent, to Rs 52,422.92 per kl, oil companies announced today.

Jet fuel constitutes over 40 per cent of an airline's operating costs and the price cut will ease the financial burden of cash-strapped carriers.

"For airline operators, every 10 per cent drop in ATF prices result in EBITDA margins improvement in the range of 300-400 bps," said ICICI Securities report.

According to analysts, the cash-strapped airline companies are unlikely to pass on the benefit to passengers.

This is the possibly the steepest cut in rates since ATF pricing was deregulated or freed in April 2002.