Airline stocks fly on falling oil | india | Hindustan Times
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Airline stocks fly on falling oil

india Updated: May 06, 2011 20:45 IST
HT Correspondent

Private carriers stocks emerged as the biggest gainers on Friday as the crude oil prices tumbled by $13 per barrel between Thursday and Friday. All major aviation stocks rose between 10% and 12% while the Sensex at the Bombay Stock Exchange was up 1.7%.

In a daylong rally when the Sensex rose 308 points to close at 18,518, shares of Jet Airways settled 11.9% higher at Rs 491.6 on the Bombay Stock Exchange. In intra-day trade, the scrip shot up by 13.6% to Rs 499 a piece.

Similarly, low-fare airline Spicejet's shares surged by 10.7% to Rs 44.4, while Kingfisher Airlines jumped 10.5% to Rs 44.4 a piece.

Market experts say that the stocks price jump was a knee-jerk reaction to a fall in crude prices. Fuel cost accounts for a significant portion of the airline's operating cost.

"Fuel cost accounts for 36%-45% of the operating costs for airlines and a fall in the prices indicate better profit margins for the airlines," said Pankaj Pandey, head of research at ICICI Securities. "However there is a big caveat to it — the crude prices have to come down."

Experts also say that the passenger traffic has gone up significantly over the last one year but high fuel prices have dampened their margins.

With the fall in crude prices a view has emerged that the crude prices will not remain at an elevated levels for ever and hence a jump in the share prices.

"Decline in crude oil prices and short-covering are the main reasons behind the strong performance by the aviation companies in Friday's trade," said, Alex Mathews, head of research at Geojit BNP Paribas Financial Services.