SpiceJet shares skyrocket 6%, close to 52-week high

S V Krishnamachari
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Shares of low-cost carrier SpiceJet rose as much as 6.33 percent to hit an intraday high of Rs 82.70 on the BSE before shedding gains and were trading at Rs 82 at around 2.45 pm. Other aviation stocks such as IndiGo-owner Interglobe Aviation and Jet Airways were trading with minor gains.

The 52-week high for SpiceJet is Rs 85.60.

The spurt in SpiceJet share prices was apparently due to the carrier's CMD Ajay Singh saying that the Delhi government's decision to slash sales on ATF prices from 25 percent to 1 percent on RCS routes will benefit the company. 

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RCS, or regional connectivity scheme, is aimed at promoting aviation services in remote areas of the country. SpiceJet is one of the carriers to have bid for flying under the scheme. The government of India is likely to officially announce the RCS routes to the concerned carriers and services are expected to commence as early as April.

"...it seems that what the Delhi government has done is they have passed on that same benefit aircraft which are fuelling in Delhi. So all aircraft which are flying under the RCS scheme, when they fuel their aircraft in Delhi will have to pay a reduced sales tax of 1 percent when they travel on these RCS routes," Ajay Singh told news channel CNBC-TV18.

Under the RCS norms, airlines serving the destinations will be entitled to ATF that will attract a concessional sales tax rate of 1 percent. Once the same is extended by the Delhi government also, it would result in cost savings for SpiceJet, Singh added.

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In January 2017, SpiceJet's market share in the domestic air traffic business stood at 12.8 percent. The largest carrier by volume is IndiGo, at about 40 percent. Domestic carriers flew 95.79 lakh (9.57 million) passengers during the month, marking a growth of 25.13 percent over 76.55 lakh passengers flown in January 2016.

There are 12 domestic carriers in the Indian civil aviation space comprising budget carriers IndiGo, SpiceJet and AirAsia India, and full-service airlines including national carrier Air India, Jet Airways and Vistara. 

The Tatas have a stake in AirAsia India and Vistara, the latter co-owned by Singapore Airlines.

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