Shares of InterGlobe Aviation, parent of the country's largest airline IndiGo, dipped 4.6 per cent to Rs 1,173 on the BSE. The stock was trading close to its 52-week low of Rs 1,119, touched on March 5, 2019. It has fallen 12 per cent thus far in CY20.
The sudden and rapidly spreading coronavirus respiratory disease is centered in China but has spread internationally, drawing comparisons with the Severe Acute Respiratory Syndrome (SARS) outbreak.
“Air traffic, revenue, and earnings dropped steeply in selected regions and with certain airlines during the SARS outbreak. We see the potential for a similar effect from the coronavirus outbreak”, S&P Global Ratings analysists Philip A. Baggaley and Rachel J. Gerrish said in recent note.
Meanwhile, Air India has cut flights to Italy, Japan and Korea while IndiGo has placed four of its crew members under home observation to check the spread of coronavirus, Business Standard
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The civil aviation regulator has issued instructions to disinfect aircraft and come up with safety precautions to prevent spread of the virus. The national carrier’s decision to reduce frequencies comes as the government suspended visas of citizens of the three countries, the report said.
The uncertainty over the timeline for resumption of MAX operations is clouding profitability at a time when the sector is facing demand headwinds due to the slowing economy – pricing shows no signs of improvement despite the consolidation in the sector.
While most peers except for the market leader are thinly capitalized they do enjoy support from strong sponsors/promoters groups to see them through difficult times. Hence, for SpiceJet, it is important that MAX operations resume at the earliest, analysts at SBICAP Securities said in result review.