Will Spice Jet gain from the collapse of Jet Airways?

Investors are excited about the potential gains that SpiceJet could earn owing to Jet Airways’ dire predicament. This enthusiasm is definitely reflecting in SpiceJet’s share price. However, SpiceJet lost market share in March 2019, making it the only airline to have failed to gain market share in the light of Jet Airways’ troubles. It reported a drop of 10 bps to 13.6 per cent in March as compared to February. Nevertheless, this is a one-off occurrence triggered by the ban imposed on the Boeing 737 Max 8 aircraft. The airline was operating 12 of these aircrafts.

SpiceJet is determined to leverage on this opportunity but the rising crude oil prices can definitely pose a challenge. Based on news reports, SpiceJet is engaged in discussions to induct some of Jet Airways’ Boeing 737s. The purpose of this to offset the losses incurred owing to the ban on the Max 8 aircraft and increase revenues. However, this does not guarantee profitability as this aspect is heavily governed by the pricing scenario in the aviation industry. Investors are watching like hawks to see if SpiceJet manages to regain market share in April.

The airlines that benefited from the Jet Airways crisis include InterGlobe Aviation Ltd., which is India’s largest airline by market share. Its domestic market share soared 350 bps to 46.9 per cent in March as compared to the previous month.

So far in 2019, the shares of SpiceJet have soared at a swifter pace than those of IndiGo. They have risen by 43 per cent while the latter’s shares gained 27 per cent.

Most airlines in India are negotiating with Jet Airways’ lessors with the intention of taking over the de-registered aircraft of the ailing company. SpiceJet has signed a Letter of Intent for 28 of Jet’s aircrafts and has recruited about 1,000 of Jet Airways’ staff.

SpiceJet, Chairman, Ajay Singh said the low-cost airline was too small to turn around the operations of a mammoth airline like Jet Airways. He was speaking to a leading new channel. Thus, Jet Airways will have to rely on a strategic investor with ample capital if it wishes to escape its plight. Thus, SpiceJet does not intend to have any financial engagement in the Jet Airways bidding process.

On Thursday, the shares of SpiceJet opened at Rs. 127.00, and hit a high and low of Rs. 133.30 and Rs. 126.80, respectively. At 11:12 am, the stock was trading at Rs. 132.10, up 4.63 per cent.