Aviation stocks fly! SpiceJet, IndiGo shares jump up to 7% as DGCA increases airfare cap

The Ministry of Civil Aviation revised the fare price band on flights with 90 to 120 minutes of duration to Rs 3,900, up from Rs 3,500 earlier. The cap on maximum chargeable fare has been raised to Rs 13,000 from Rs 10,000.

The order is effective immediately and comes at a time when airlines are staring at a traditionally weak quarter of Jan-Mar along with uncertain demand sentiment. Domestic air traffic on February 10 was at 67 percent of average daily domestic traffic seen in 2019.

SpiceJet reported a net loss of Rs 57 crore for the quarter ending December 31, 2020, as against a profit of Rs 77.9 crores during the same period last year. IndiGo, the largest airline in India, posted a net loss of Rs 620.1 crore for Oct-Dec as against a net profit of Rs 496 crore in the same period last year.

Recently, Hardeep Singh Puri said that floor and ceiling price on airfares was an extraordinary measure to prevent a tariff war, which could trigger bankruptcies.

On May 21, the DGCA issued an order, according to which airfares on domestic routes were to be capped from May 25, 2020, with an intention to allow air services to resume without any massive drop or rise in prices. Domestic flights resumed after a 2-month shutdown due to the COVID-19 pandemic.