Airline stocks drop as crude oil prices gain

Shares of two aviation firms fell 1.27% to 1.81% at 10:40 IST on BSE as global crude oil prices rose.


Meanwhile, the S&P BSE Sensex was down 206.95 points or 0.83% at 24,693.68.

Jet Airways (India) (down 1.81%) and SpiceJet (down 1.27%) declined. InterGlobe Aviation rose 1.29%.

In the global commodities markets, Brent for June settlement was currently up 27 cents at $40.11 a barrel. The contract had risen $1.97 a barrel or 5.2% to settle at $39.84 a barrel during the previous trading session.

Higher crude oil prices adversely affect aviation firms as jet fuel prices, which typically constitute about 50% of airlines' operating costs, are directly linked to international crude oil prices.

Meanwhile as per recent report, civil aviation ministry is likely to abolish the 5/20 rule. An existing 5/20 rule restricts airline companies from flying abroad unless they have flown in India for five years and have a fleet size of 20 aircraft. According to reports, the ministry is considering as many as 15 options to replace the controversial rule. To ensure that the older airlines do not complain a level playing field will be provided and some form of restrictions will be there, report added. The incumbent airlines complain that any relaxation in the 5/20 rule will benefit unlisted newer airlines Vistara and AirAsia India. The policy is in its final stage and the draft Union Cabinet note has already been prepared. The ministry is likely to send the draft note for the Cabinet's nod this week. This will allow the Cabinet to clear it by this month, report added.

(culled from www.business-standard.com)