Aviation companies under pressure as jet fuel price touches all-time high; brokerages estimate Q4 losses from IndiGo, SpiceJet

Aviation companies’ shares slipped up to 3 per cent on the BSE intraday on Monday, as the Air Turbine Fuel (ATF), also called Jet Fuel, raised for the ninth straight time this year by 3.2 per cent to an all-time high, amid a surge in the global energy prices. 

Aviation stocks responded negatively to this development as Interglobe Aviation (IndiGo) shares declined most by 3 per cent to Rs 1805.6 per share, while SpiceJet shares dipped over 1 per cent to Rs 54.2 per share on the BSE intraday today. 

The price of aviation turbine fuel (ATF) is hiked by Rs 3,649.13 per kilolitre, or 3.22 per cent, to Rs 1,16,851.46 per kl (Rs 116.8 per litre) in the national capital, according to a price notification of state-owned fuel retailers, a PTI report said on Sunday. 

Jet fuel, which makes up for almost 40 per cent of the running cost of an airline, has this year surged to new highs. ATF prices have increased every fortnight since the start of 2022, the report also said. “In the nine hikes beginning January 1, ATF prices have been increased by Rs 42,829.55 per kl (Rs 42.8 per litre) or over 50 per cent.” 

According to Reliance Research, “Aviation companies are expected to witness 25 per cent year-on-year (YoY) growth and likely to decline by 12 per cent sequentially in revenue, while a higher fuel cost and other cost pressure would impact their profitability.” 

Aggregate EBITDAR margin is expected to decrease by 484 basis points (bps) YoY and down 1,513 bps sequentially to 3.3 per cent, it said, adding further that both the companies – IndiGo, SpiceJet –  are expected to report a loss in 4QFY22.  

“We expect SpiceJet (SPJET) to report Rs 5.2bn net loss during the quarter (vs. Rs2.4bn net loss in 4QFY21) due to the sharp rise in ATF prices and traffic decline. On the other hand, IndiGo (INDIGO) is expected to report a net loss of Rs 13.3bn (vs. Rs11.6bn net loss in 4QFY21) led by higher fuel costs.”