Airlines may sustain losses on limited operations, demand worries

Aviation stocks InterGlobe Aviation (IndiGo) and SpiceJet gained 5-7 per cent each on Thursday after the government announced plans to open up domestic air travel from May 25. This move came as a relief for airline companies, which have not flown a single flight for the last two months even as they incurred fixed costs.

The resumption in air travel, however, will be limited as companies can only operate a third of their capacity. Further, fares charged to customers will be in a certain band, based on the route and distance.

Despite the limited number of flights and price restrictions, analysts believe fares are yield-accretive for airlines. For a Delhi to Mumbai flight, the fare bracket, including taxes, would be Rs 4,500 to Rs 11,500.