Despite subdued improvement in operations, Indian aviation stocks have risen by 34-107 per cent in the last three months, Motilal Oswal Financial Services said in a report.
Accordingly, it pointed out that on a YoY basis, IndiGo is up by 29 per cent (outperforming Nifty by 16 per cent), while SpiceJet is up mere by 2 per cent YoY.
“IndiGo stock has risen on the back of Covid-19 vaccine optimism and gains in market share; SpiceJet was further supported by the re-licensing of the Boeing 737 MAX,” the report said.
“The outlook for the sector remains ‘Neutral’.”
According to the report, optimism over the vaccine could certainly result in increased flying confidence, leading to the quicker normalisation of operations versus earlier estimates.
“However, the same reason has also led to a spike in crude oil prices, which were previously subdued, somewhat easing the pain of airline companies in the currents unprecedented times,” it said.
“It’s been six months since the resumption of domestic flight operations in India (post complete grounding over April-May’20).”Domestic operations in India are still 50 per cent of pre-Covid levels, recording a gradual improvement over these last six months.Besides, it said a rise in the number of unique city pairs has resulted in huge growth in the international market over the last two years.However, the Covid disruption has resulted in a significant reduction in such city pairs (down by 67 per cent YoY).”Thus, we believe international travel is likely to take longer to recover, with confidence likely to first improve in intracontinental flying (v/s intercontinental flying).”