Market Impacts on Go First crisis, flights cancellation: Budget carrier Go First's Insolvency filings and flight cancellations are terrible for the airline sector because they would restrict capacity and might raise prices on some routes, said a group representing travel agents called TAAI on Wednesday.
Reacting the development, Shares in IndiGo, rose as much as 8.2% in to their highest level in 18 months, while Low-cost operator SpiceJet Ltd stock climed almost 6%; it unveiled plans to revive 25 grounded plans with the help of a government credit program.
But lenders won't likely be under too much stress as a result of Go Airlines' bankruptcy, according to analysts at Jefferies India Pvt Ltd.
Jefferies analysts wrote in a May 2 note as under: “Based on filings, we understand that loans from banks were between nearly 20 billion rupees (USD 244 million) to 25 billion rupees, which is just around 2 basis points of sector loans," adding that “majority of liabilities are as lease liabilities. We see low risk for lenders."
The Jeffries report aid, Indigo is dealing with a similar P&W engine issue but has managed the crisis thanks to its larger fleet and superior vendor negotiations.
In a second note, analysts at Credit Suisse noted that lessors might be more inclined to transfer some of the grounded Go First planes to competitors IndiGo. Go First Airlines stated on Tuesday that all of its scheduled flights will be cancelled from May 3 to May 5, and that all passengers will receive a full refund.
Go First's bankruptcy may stregnthen airfares in India and give other domestic airlines an opportunity to grab a larger chunk of the market share, analysts said. Stock prices of India's largest airline, IndiGo, were up 5.1% on Wednesday, after rising as much as 8.2% earlier.
According to Prateek Kumar, an analyst at Jefferies, "if the suspension is prolonged, other airlines that are adding capacity would look to avail the slots vacated by Go First and grab onto the market share."
Indigo is dealing with a similar issue with P&W engines for a portion of its fleet, but due to the scale of its fleet and superior vendor negotiations, Kumar said, Indigo has been able to manage the crisis better.
Given that the two airlines' fleets are comparable, lessors might be ready to assign some Go First planes to IndiGo, according to Credit Suisse analysts, who also noted that such a move would increase IndiGo's market share and result in higher yields in a situation where capacity is limited.
Go First files for insolvency proceedings, suspends flights, Read More
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