Aviation stocks gain up to 10% as domestic flight ops to resume from May 25

The stock of the budget carrier SpiceJet was locked in the upper circuit of 5 per cent at Rs 42.95 on the BSE.
Shares of two listed aviation companies - InterGlobe Aviation and SpiceJet – rallied up to 10 per cent on the BSE on Thursday in early morning trade after the government on Wednesday announced that domestic airline operations would resume on May 25, more than two months after all flights were halted.

The stock of the country’s largest passenger airline InterGlobe Aviation, which operates its flights under the IndiGo brand, has rallied 10 per cent to Rs 1,002 in the opening deals. At 09:26 am, it was trading 7 per cent higher at Rs 975 on the BSE.

The stock of the budget carrier SpiceJet was locked in the upper circuit of 5 per cent at Rs 42.95 on the BSE. Around a combined 181,000 shares changed hands on the counter and there were pending buy orders for around 7 million shares, the exchange data shows.

An announcement which will offer some respite to the otherwise beleaguered sector (due to the outbreak of COVID-19), the Civil Aviation Ministry has said that the domestic flight will resume operations May 25th 2020 onwards in a calibrated manner. 

The ministry also stated that the government has intimated all airports and airline companies to gear up for starting their operations from the scheduled date and the Standard Operation procedures for passenger movement will be followed shortly. Commercial flights have been suspended since March 25th 2020 and only cargo flights and special flights were allowed to operate.

“The resumption of flights after 2 months of being grounded will offer some temporary relief to the airlines industry as it will not be completely non-operational but it does not mean it will be able to stimulate the needed passenger traffic given how the virus is showing no signs of abating,” CARE Ratings said in a note.

However, the credit rating agency still believes that the passenger traffic will decline by 30 per cent during the current financial year 2020-21 (FY21) as there will be certain inhibitions and apprehensions of travelling besides restrictions of the capacity that can be used on flights. Passenger traffic has grown by 13.7 per cent during FY19 and 0.7 per cent during FY20, it added.
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