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Hazy weather

With airline stocks reeling under rising crude and falling rupee, it could just be a long-term opportunity

Soumik Kar

At the beginning of 2018 — one of India’s biggest airlines — Jet Airways, was flying high. Despite a drop in yield and crude price moving up, investors were bullish with the stock hitting a 52-week high at Rs.884 on January 5. With passenger traffic growth on the rise, stocks of other listed players like IndiGo and SpiceJet were trading at Rs.1,202 and Rs.146 as of January 1 this year compared to Rs.824 and Rs.59 on January 1, 2017.

But post-June as Brent crude started hovering around the $80 mark, rising operating cost adversely impacted margins. Adding to the airlines’ woes, even the rupee started depreciating, and yields also dropped. Consequently, investors began to steer clear of aviation stocks. As of October 3, most aviation stocks are trading at their 52-week low with IndiGo at Rs.770, Jet Airways at Rs.175 and SpiceJet at Rs.63.

Turbulent times

For Jet Airways, macro headwind isn’t the sole reason for concern. Its mountain of debt has also impacted profitability as interest cost soared. A double blow has hit the company – its revenue available per seat kilometre (RASK) dropped by 4%, and at the same time, fuel cost availa

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