Sunday’s crash of a Boeing 737 Max 8 operated by Ethiopian Airlines has led many countries to ban the aircraft. India was no exception, deciding on Tuesday night to ground the aircraft, the latest version of the 737 family.

The number of Max 8 aircraft in India is not large. But this comes at a time when Jet Airways (India) Ltd and market leader InterGlobe Aviation Ltd (which runs IndiGo) have cancelled flights because of financial troubles and pilot shortage, respectively. Incrementally, the ban is expected to have an impact on supply and eventually cause fares to rise.

In India, two aviation companies, SpiceJet Ltd and Jet Airways, have the 737 Max 8 fleet. SpiceJet has 12 operational Max 8 aircraft, representing 20%-plus seat capacity. The beleaguered Jet Airways has five.

(Graphic: Vipul Sharma/Mint)

IndiGo and Jet Airways were already estimated to have cancelled 100-plus daily flights, said Santosh Hiredesai, analyst at SBICAP Securities Ltd. The ban could add 70-80 more cancellations, he said. “According to the current ongoing winter schedule, the number of daily departures in the domestic market is estimated at ~3200. In keeping with that, these cancellations amount to about 5% of capacity and should further drive tightness in the market, taking up fares and pulling down growth rates," said Hiredesai.

Analysts say IndiGo is set to benefit the most from this development given its size. The airline enjoys a domestic market share of more than 40%. Besides, it doesn’t have any Boeing 737 Max 8 aircraft. Its shares rose 2% on Wednesday.

Having said that, it is too early to quantify the impact on the profitability of SpiceJet. Investors would do well to closely monitor the extent of the ban in terms of its duration. More clarity on any compensation clauses applicable to airline operators will also help.

However, SpiceJet investors are jittery. “For SpiceJet, should the issue prolong, it could result in loss of profits in the impending peak season for the industry, but expect some compensation though from the OEM (original equipment manufacturer) depending on the agreement," pointed out Hiredesai.

SpiceJet is scheduled to take delivery of more of these aircraft. So far this week, its shares have dropped by 7.6% on BSE.

On the brighter side, amid all this, relatively lower crude oil prices will provide much-needed respite for all aviation companies in this quarter.