Why are airline stocks SpiceJet and IndiGo down today?

The steep rise in jet fuel prices amid ongoing conflict between Russia and Ukraine hammered airline shares on Wednesday. Shares of budget carriers IndiGo and SpiceJet fell up to 3% in opening deals on the Bombay Stock Exchange (BSE), in line with benchmark index Sensex, which dived over 1% following weak cues from global peers.

The jet fuel or Aviation Turbine Fuel (ATF) prices, which makes up for almost 40% of the running cost of an airline, were raised by 3.3% to all-time high levels across the country on Tuesday. This was the fifth hike in jet fuel or Aviation Turbine Fuel (ATF) prices this year following a record rally in international crude prices.

Meanwhile, petrol and diesel prices remained unchanged in the four metros of the country for a record 117th day in a row. Though the fuel prices are market-determined, state-owned oil marketing companies (OMCs) have made no changes in petrol and diesel prices despite a record spike in international Brent crude prices. This was in coincidence with ongoing assembly elections in four states and one Union territory like Uttar Pradesh and Punjab.

The global benchmark Brent crude hit $100 a barrel last week after Russia announced the invasion of Ukraine, while it breached $110 a barrel in early deals today after Moscow intensified their bombardment of the Ukrainian city of Kharkiv in a major change of tactics as fights enter the seventh day. There is fear in the market that harsh sanctions against Russia, one of the key oil producers, will create supply disruptions, in an already very tight market.

Weighed down by rise in jet fuel prices, shares of InterGlobe Aviation, the parent company of low-cost carrier IndiGo, declined as much as 2.97% to hit a low of ₹1,819.40 on the BSE. The stock opened lower at ₹1,850 against the previous close price of ₹1,875.25.

In a similar trend, SpiceJet shares dropped 2.15% to touch a low of ₹58.9 in opening deals against the previous close price of ₹60.2 on the BSE.

Meanwhile, the BSE Sensex was trading 900 points or 1.6%, lower at 55,345, led by losses in index heavyweights such as Asian Paints, ICICI Bank, Kotak Mahindra Bank, HDFC, HDFC Bank, Maruti Suzuki India, and Bharti Airtel.