One man’s loss is another’s gain. Late last week, investors piled on to shares of SpiceJet Ltd and InterGlobe Aviation Ltd (IndiGo), after Jet Airways (India) Ltd’s troubles went from bad to worse. Shares of the two airlines gained 24.6% and 7.6%, respectively, in just two trading sessions last week after their beleaguered competitor was forced to ground a large number of its leased planes.

But after Jet Airways announced a bank-led bailout plan on Monday, the two stocks gave up some of their gains. The banks said they will infuse 1,500 crore into the airline to help revive operations and eventually ready it for a sale.

But here is the interesting bit. SpiceJet and IndiGo shares have given up only a small portion of their gains. At last count, they had corrected less than 2% each from last week’s close. Jet Airways’ shares, meanwhile, have risen 22.7% this week.

In other words, investors seem to have concluded that Jet Airways’ debt resolution plan will keep all three airlines in a happy place. As strange as this sounds, this may well be how things play out.

(Vipul Sharma/Mint)

Jet Airways, undoubtedly, will be in a far better place with the latest fund infusion. It can pay some of its dues and get many of its planes back in the skies. But how will its competitors gain?

As it turns out, they may still be able to keep some of the market share gains, which came as a result of the airline’s woes. After all, hardly anyone expects Jet Airways’ capacity to return to pre-crisis levels very quickly. IndiGo and SpiceJet increased their market share in February by 3.5 percentage points and 1.3 percentage points, respectively, on a year-on-year basis. During this time, Jet Airways’ market share fell 5.4 percentage points.

“Even if Jet gets an investor by end-June, the airline will be able to restore only 50% of its H1FY19 capacity by the end of calendar year 2019," says an analyst who did not want to be named. But much also depends on how much money the new investor is able to infuse.

With the global ban on Boeing 737 Max 8 planes from March, capacity is no longer expected to rise at the pace some analysts had feared. This means the prospects for yields are encouraging.

“Recent events of capacity disruption of competitors can drive up IndiGo’s FY2020 capacity addition as well as yields," said Garima Mishra, analyst at Kotak Institutional Equities, in a report on 22 March. Of course, this was before the resolution plan was announced, although the prognosis would not have changed much since. Deeper domestic network and possible availability of slots can lend wings to IndiGo’s international aspirations as well, she added.

While fares skyrocketed in March, they are not sustainable from a medium-term perspective. Still, the outlook on fares isn’t too bad. It will be another story if Jet Airways finds a deep-pocketed investor, who is keen to recoup the domestic market share quickly. But as things stand, it looks like the airline’s woes and its bank-led bailout plan have improved fortunes of all listed firms simultaneously. 

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