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Despite the jump in SpiceJet’s stock this week, it is down almost 34% so far this calendar year. (Photo: Reuters)
Despite the jump in SpiceJet’s stock this week, it is down almost 34% so far this calendar year. (Photo: Reuters)

SpiceJet  stock  takes  off on  Max  push

In the past two days, the SpiceJet stock rallied 26% on easing concerns around return of Boeing’s 737 Max planes

The performance of SpiceJet Ltd’s shares has lagged those of larger peer InterGlobe Aviation Ltd this year. In the past two days, some of the gap was bridged with the SpiceJet stock rallying by 26% on easing concerns on the return of Boeing Co.’s 737 Max planes. The US Federal Aviation Administration has allowed 737 Max to return to the domestic skies after being grounded for about two years after two fatal crashes.

The development is positive for SpiceJet, which has been incurring maintenance and other costs on its 13 grounded 737 Max aircraft. As such, every country’s regulator will have to give separate approvals. Ashish Shah, an analyst at Centrum Broking Ltd, said: “In India, the Directorate General of Civil Aviation could possibly take two-three months to give its approval."

These Max aircraft are comparatively about 15% more fuel efficient. Hence, the potential return of these planes augurs well. Further, the outlook improves for SpiceJet receiving accumulated claims of 950 crore pertaining to its 13 grounded Max aircraft. “With clarity on return of the Max aircraft, the settlement process could get closure and give SpiceJet the much-needed cash flow," said Shah.

Meanwhile, hereon, the recovery in domestic air traffic growth remains crucial. True, the month-on-month improvement of 34% in October is encouraging.

But the pandemic makes the scenario uncertain. Note that despite the jump in SpiceJet’s shares this week, the stock has declined by almost 34% so far this calendar year in complete contrast to the 27% increase in InterGlobe’s shares

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