Last update: May 03, 2023, 12:02 p.m. HST
Why Are Rin= Aviation Stocks Singing Today?
Go First’s insolvency will remove 9% of domestic supply in the aviation sector, according to BofA Securities.
Shares of aviation stocks rose in Wednesday’s trade as they jumped as much as 8% after Wadia Group-owned Go First filed for bankruptcy on Tuesday May 2. Following the announcement, shares of InterGlobe Aviation (IndiGo), Jet Airways and SpiceJet soared as much as 8% in Wednesday’s early trading session. Also, a sharp drop in crude oil prices on international markets supported aviation counters.
Shares of InterGlobe Aviation rose 8% to Rs 2,235.95 on Wednesday, before trading at Rs 2,174.60 at 09:35. The certificate had stood at Rs 2,070.40 in previous sessions. Similarly, shares of SpiceJet jumped around 6% to Rs 33.25 from its close at Rs 31.49 in the previous session. Shares of defunct airlines Jet Airways also jumped 5% to Rs 60.59.
Why are aviation stocks rising?
Go First’s bankruptcy filing on Thursday shone a spotlight on Indian airlines. This means lower competition for peers.
With Go First filing for bankruptcy, the Indian aviation market is moving towards a duopoly structure. IndiGo and the Tata Group together account for nearly 80% of the entire industry.
However, the two groups have a different positioning for customers. While IndiGo is a low-cost carrier, Tata Group is primarily a full-service carrier.
Go First’s insolvency will remove 9% of domestic supply in the aviation sector, according to BofA Securities.
In March this year, IndiGo continued to remain the market leader with a market share of 56.8%, followed by Vistara (8.9%) and Air India (8.8%). Go First held a 6.9% market share in March, followed by SpiceJet at 6.4%.
The Wadia Group airline said it could not continue to meet its financial obligations and blamed US firm Pratt & Whitney’s “faulty engines” for grounding 50% of its fleet. In the buzz, all Go First flights have been suspended from May 3-5.
The low-cost carrier has filed for voluntary insolvency resolution proceedings in the National Company Law Tribunal (NCLT), CEO Kaushik Khona said. Aviation regulator DGCA also issued a show cause notice to the airline after Go First decided to cancel flights for three days.
Previously, Go First was looking to raise around Rs 3,600 crore through its initial public offering (IPO), which was again postponed amid weak sentiment and owners’ reluctance to inject funds into the loss-making company. Go First’s draft Red Herring prospectus expired in August 2022 and the company has been considering a listing since 2015.
The airline had received market regulator approval for its IPO but initially withheld the plan to sell shares in August 2021 after SEBI called the promoters, the Wadias, into an ongoing investigation , then in December 2021, Go First further delayed the offer. due to the outbreak of the Omicron wave.
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