InterGlobe Aviation Ltd stock has been relentless. Shares of the company that runs India’s largest airline IndiGo soared to a new high on Friday with a gain of 11% on the National Stock Exchange.
“Investors seem to be bullish about the prospects of bringing aviation turbine fuel (ATF) under the ambit of the Goods and Services Tax (GST),” an analyst said on condition of anonymity. bleak to begin with,” he said. The GST Council has decided that it is not appropriate to bring petroleum products under GST at this stage.
The gradual lifting of restrictions and the increasing pace of vaccination have increased domestic air passenger traffic. According to the Directorate General of Civil Aviation, passenger traffic grew by about 34% month-on-month in August. Nevertheless, August’s performance was still down 14% from the highs seen in February.
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Losses for IndiGo are expected to decline sequentially in the September quarter. “Indigo Passenger Yield and RASK are likely to exceed 2Q-4Q FY21 levels, driven by support from government fare norms. We estimate that the overall 2Q loss will be approx. ₹1,200 crore ( ₹900 crores counting for potential MTM forex gains). This will be less than half of the first quarter of FY12,” analysts at Credit Suisse Securities (India) Pvt Ltd said in a report on September 16. RASK is revenue per available seat kilometer, a unit measurement for airlines. .
Meanwhile, the government has allowed airlines to fly 85% of their pre-Covid domestic capacity from the earlier 72.5%. Analysts say that if the demand recovery is good and the third Covid wave does not hit the country, it improves the outlook for the December quarter and accordingly, airlines may see a reduction in losses.
To be sure, it is unlikely that FY 2022 will bring a major relief on profitability, especially given the firming up in crude oil prices. In FY21, IndiGo’s net loss was around ₹5,800 crores. After Q1FY22, the airline’s net worth turned negative.
However, gains in market share have kept sentiments upbeat for the stock, which has risen 46% from its pre-Covid high.
Going forward, the slow pace of recovery and a possible third COVID wave remain the primary challenges.
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