Why SpiceJet and IndiGo shares are surging today
Shares of top airline players SpiceJet and IndiGo have soared today after a 6% cut in aviation turbine fuel (ATF) prices. On the BSE, SpiceJet's shares jumped up to 6%, hitting ₹68.50. Meanwhile, InterGlobe Aviation-operated IndiGo saw its shares go up by 2.2%, reaching ₹4,896. This bump comes after the ATF price was slashed to ₹87,597 per kiloliter in Delhi from the earlier ₹93,480.
Fuel price reduction eases operational costs for airlines
The dip in ATF prices is likely to ease some of the financial strain on airlines, given that fuel makes up about 40% of their operating costs. This price cut brings jet fuel costs down to their lowest since April this year. In September, ATF prices dropped by 4.6% or ₹4,495.5 per kiloliter to ₹93,480.22 in Delhi. However, prices vary across states because of local taxes.
Airlines seek GST inclusion for ATF
Currently, ATF isn't covered by GST and is taxed at the state level with excise duty and VAT. This leads to different operational costs for industries like airlines. In some states, VAT on ATF can go as high as 30%. Domestic airlines have suggested bringing jet fuel or ATF under the goods and services tax. This would let them claim input tax credit, which could help lower their overall costs.
SpiceJet, IndiGo shares see substantial growth over the past year
Over the past year, SpiceJet's shares have seen an 88% increase. So far this year, the stock has risen by 11.76%, with a growth of 10% in the last six months. InterGlobe Aviation shares have more than doubled in the last one year and risen by 38% in the last six months. On a year-to-date basis, these stocks have gained an impressive 64.50%.
