SpiceJet extends rally, soars 14% as Boeing 737 Max gets US FAA clearance

Topics SpiceJet | Buzzing stocks | Markets

SpiceJet has rallied 38 per cent in the past 4 days
Shares of budget airline SpiceJet soared as much as 13.6 per cent to hit a high of Rs 75.4 on the BSE on Thursday after the US Federal Aviation Administration gave green-signal to fly Boeing 737 Max aircraft after two-years of grounding. 

At 9:54 am, the stock was ruling 10 per cent higher at Rs 73 on the BSE, as 0.08 per cent dip in the benchmark S&P BSE Sensex index at 44,146. With today's rally, the stock of the airline has surged 38.4 per cent on the BSE compared with 1.6 per cent gain in the Sensex index in the past four trading sessions.

On Wednesday, US aviation safety regulator-- US FAA -- cleared Boeing's 737 Max plane to fly again, lifting grounding orders put in place in March 2019 after two deadly crashes. However, the regulators said the clearance would not allow the plane to "return immediately" to the skies as the existing aircraft will need to be modified before going back into service, with changes to their design.

"Alongside the software and wiring changes, pilots will also need training. Besides, the approved changes have eliminated what caused these particular accidents," the FAA said. 

SpiceJet is the sole operator -- apart from the grounded Jet Airways -- of Boeing 737 Max planes in India with 13 aircraft in its fleet. While announcing the latest September quarter results on November 11, SpiceJet had said that it was continuing to incur various costs related to 13 grounded Max planes. 

"Despite its inability to undertake revenue operations, the company continues to incur various costs with respect to these aircraft," the airline said in a regulatory filing on Nov. 11. 

Global brokerage HSBC, in a recent report dated November 17, had upgraded the stock to 'Buy' from 'Hold' with a revised target price of Rs 80 from Rs 26.5.

"Once 737 Max returns to operations, SpiceJet could start receiving incentives as part of the sales and lease back agreement... Although it is difficult to speculate, its recent deal to lease two A330 gives us some confidence. Boeing might also provide support as SpiceJet’s survival is crucial for Boeing to have a continued presence in India," it said in the report.

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