MUMBAI: Shares of SpiceJet Ltd have lagged those of InterGlobe Aviation Ltd this year. In the past two days, the gap has narrowed a bit, with SpiceJet shares surging 26% to ease concerns about the return of Boeing’s 737 Max jet. The US Federal Aviation Administration has allowed the 737 Max to enter service after having grounded the planes for approximately two years following two fatal accidents.
The news is positive for SpiceJet, which has been incurring maintenance and other costs on its 13 737 Max jets on the ground. As such, each country’s regulator would have to grant separate approvals. Ashish Shah, an analyst at Centrum Broking Ltd, said: “In India, the Directorate General of Civil Aviation could take 2-3 months to give its approval.”
The Max aircraft is approximately 15% more fuel efficient compared to others. Therefore, the possible return of these aircraft bodes well for operations. In addition, the outlook improves for SpiceJet receiving accumulated claims from ₹950 crore corresponding to its 13 Boeing Max planes on the ground. “With clarity on the return of the Max aircraft, the liquidation process could be closed and give SpiceJet much needed cash flow,” says Shah.
Meanwhile, the recovery of domestic air traffic growth remains crucial. True, the 34% month-on-month improvement in October is encouraging. But the scenario remains uncertain due to the pandemic. Note that despite the jump in SpiceJet shares this week, it is down nearly 34% so far this calendar year, in complete contrast to the 27% rise in InterGlobe Aviation shares.
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