Airlines stocks cruising

Airline stocks took off in the morning trades today. Indigo opened almost 5% higher at Rs.1704 but form there slipped on profit booking and is now trading at Rs.1654 levels. Spicejet, on the other hand is doing much better – rising over 7% to Rs.94 and is now trading at Rs.91 levels.

These stocks are up on the back of the Civil Aviation Ministry yesterday allowing airline companies to increase the upper and lower cap on airfare by up to 30%.

It has allowed revising fare price band on flights with 90 to 120 minutes of duration to Rs 3,900, up from Rs 3,500 earlier.

The cap on maximum chargeable fare has been raised to Rs 13,000 from Rs 10,000.

However, the cap on airline capacity, currently at 80 per cent of the pre-Covid level, has been extended till March 31.

Though the ministry has given the go-ahead, the question is whether the airlines will be able to increase fares as demand is yet to take off. And with demand being low, it would be very difficult for these companies to hike rates and that explains why the market is not exactly gung-ho about this news.