atf prices: Airline stocks climb up to 6% as OMCs reduce ATF prices

Shares of airline operators advanced up to 6 per cent in Monday’s trade after the air turbine fuel (ATF) prices were reduced by 2.2 percentage points.

ATF prices are revised by oil marketing companies (OMCs) on the 1st and 16th of every month based on rates of benchmark international oil rates in the previous fortnight. The latest price cut marked the second reduction in rates this year. Prices had peaked at Rs 141,232.87 per kl (Rs 141.23 per litre) last month.

Following the development, shares of

climbed 6.02 per cent to hit a high of Rs 40.45 on BSE. It eventually closed at Rs 39.60, up 3.8 per cent. rose 1.44 per cent to hit a high of Rs 1,809.50 on BSE. The scrip closed the session at Rs 1794.40, up 0.6 per cent. settled the session at Rs 104.60, up 0.43 per cent.

ATF prices continue to remain at elevated levels. A 7 per cent drop in the rupee against the US dollar could further adversely impact airlines, given that 70 per cent of costs are dollar-denominated,

said last week.

“Despite taking a significant price increase, airlines may be required to take further hikes to offset the surge in ATF prices, possibly reaching a point of demand elasticity in the travel industry. The aggregate market share of Tata-group-backed airlines stood at 20.6 per cent as of May. The recent acquisition of Air Asia by Air India is likely to provide greater synergies and improve competitiveness going forward,” the brokerage said.

JM Financial said the competitive intensity in the airline sector is expected to intensify with the addition of Akasa Air and Jet Airways. It believes InterGlobe’s share price adequately factors improving (expected) momentum in passenger demand.

Meanwhile, Prabhudas Lilladher believes the June quarter was the best quarter for the Indian aviation industry in the post-pandemic world. Domestic air passenger traffic is now back to pre-Covid levels, driven by leisure and corporate travel entirely coming back, it said.

“However, load factors are impacted compared to pre-Covid levels due to sharp rise in ticket prices. Further elevated fuel prices (up 40 per cent QoQ) are expected to put pressure on Ebitda despite yields, load factors and passenger levels improving QoQ,” it said in a note.

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