Aviation stocks fly high day after government lifts domestic airfare caps

Aviation stocks were in heavy demand on Thursday, a day after the Civil Aviation Ministry said that domestic airfare caps will be removed.

The Union Aviation Ministry on Wednesday said that limits imposed on domestic airfares will be removed from August 31, after a span of approximately 27 months.

Shares of InterGlobe Aviation opened at Rs 2,070.05, then gained further to touch 2,080.80, registering a jump of 2.09 per cent over its last close.

SpiceJet Ltd opened at Rs 46.05, then jumped as much as 6.80 per cent to Rs 47.90 a share.

"The decision to remove air fare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF). Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future," Aviation Minister Jyotiraditya Scindia said on Twitter.

ATF prices have been coming down during the last few weeks after jumping to record levels, primarily due to the Russia-Ukraine war that began on February 24.

On August 1, the price of ATF in Delhi was Rs 1.21 lakh per kilo-litre, which was around 14 per cent lower than last month.

The ministry had imposed lower and upper limits on domestic airfares based on flight durations when services were resumed on May 25, 2020, after a two-month lockdown due to the COVID-19 pandemic.

On Wednesday, the Civil Aviation Ministry stated in an order: "After review of the current status of scheduled domestic operations viz-a-viz passenger demand for air travel...It has been decided to remove the fare bands notified from time to time regarding the airfares with effect from August 31, 2022".