Airline stocks soared in intra-day trading on the Bombay Stock Exchange on Wednesday before settling after complete details of the National Civil Aviation Policy were revealed.
During intra-day trading SpiceJet gained 5.22 per cent, InterGlobe Aviation the owner of IndiGo gained 4.32 per cent and Jet Airways gained 2.91 per cent.
However, by the end of the trading day, SpiceJet closed 3.51 per cent higher at ₹66.4, InterGlobe Aviation closed 1.9 per cent higher at ₹1,008 while Jet Airways closed 0.21 per cent higher at ₹561.
Analysts viewed the announcements in the National Civil Aviation Policy as largely neutral for existing airlines.
“While the National Civil Aviation Policy will be good for the struggling new carriers like Vistara and AirAsia India, we don’t really see this as a negative for the competition because in today’s global environment airlines also need to compete,” said Pankaj Sharma, Head of Equities at Equirus Securities.
Other analysts also pointed to decisions like capping of fares for one-hour flights and additional cess as things that will have a negative impact on existing carriers.
“Such provisions (capping of fares) are against free market principles and may negatively impact on the existing players. The provisions on regional connectivity can grow the market but it is more long-term benefit. In the short-term airlines will be hard pressed to make such routes viable. It is not just fares but other modes of transport that airlines need to compete against in smaller towns,” an analyst a foreign brokerage firm in Mumbai said on condition of anonymity.
Most brokerage firms expect the gains of Wednesday to be neutralised in the next trading session with most of the immediate short-term benefits of the National Civil Aviation Policy accruing to new carriers.