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Aviation stocks go up on GST cut buzz

Air carriers, including SpiceJet, Jet Airways and InterGlobe Aviation (IndiGo), ruled on Tuesday after reports that the civil aviation ministry is considering a steep reduction on the Goods and Services Tax (GST) levied on aviation maintenance, repair and overhaul (MRO) industry.

SpiceJet was trading 0.83 per cent up at Rs 133.95 at around 9.35 am (IST) whereas IndiGo and Jet Airways climbed 0.77 per cent and 1.24 per cent to Rs 1,467 and Rs 621.80, respectively.

“We are trying to bring it down to a level of 5 per cent (from the existing 18 per cent)," PTI reported quoting Vandana Aggarwal, the economic advisor to the Ministry of Civil Aviation.

At present, the MRO industry is taxed at 18 per cent, making aircraft servicing in India costlier than other countries.

The report added that airline industry spent about $950 million in 2016-17 on aircraft maintenance and servicing and only 10 per cent of this business came to Indian MRO companies.

Elara Capital expects aviation firms to report 14 per cent yoy fall in their cumulative PAT due to anticipated flat yields of IndiGo and 13 per cent annual increase in unit fuel cost to Rs 1.4 per seat-km.

“Our air fares analysis indicates that SpiceJet better managed its yields that is expected to improve 7 per cent yoy, following its higher exposure in lower demand quartile routes,” Elara Capital said in a report.

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