Aviation stocks saw a sharp rally in a bearish market on Wednesday, with the shares listed airlines surging as much as 6% in early trade as investors bet the grounding of non-listed rival Go First Airlines would boost profits for the rest.

Shares of Interglobe Aviation (Indigo), Spicejet, Taal Enterprises, Jet Airways (India) and Global Vectra Helicorp gained 2% to 5% during the session.

Indian low-cost carrier, Go First filed for voluntary insolvency resolution proceedings with the National Company Law Tribunal (NCLT) on Tuesday, citing the non-supply of engines from Pratt & Whitney as the reason. The Wadia Group-owned airline halted all operations on May 3 and 4, grounded nearly 50% of its A320neo fleet.

The company is in a serious fund crunch as the ‘serial failure’ of Pratt & Whitney engines has set the airline back by ₹10,800 crores in lost revenues and additional expenses.

Promoters had invested Rs 3,000 crore in the last 15 months, insufficiently covering the expenses. Since its inception, the total promoter investment has stood at around Rs 6,500 crore.

In the calendar year 2022, Go First held an 8.9% market share, and a sudden disruption in operations is likely to benefit other companies while raising airfares due to supply restrictions.

According to DGCA data, IndiGo had the biggest market share at 56.8% in March 2023, followed by Vistara at 8.9% and Air India at 8.8%. SpiceJet had the greatest passenger load factor (PLF) in March 2023, with 92.3%, followed by Vistara with 91.6%, and Go First with 90.2%.

Due to GoFirst’s insolvency, analysts expect IndiGo to obtain the market share. On the other hand, SpiceJet is rehabilitating grounded planes to capitalise on Go’s demise.

Additionally, a sharp decline in crude oil will benefit aviation stocks.

InterGlobe Aviation, the parent company of IndiGo, saw a surge by as much as 8% in the opening trade, reaching a high of ₹2,236.95. The momentum continued throughout the day, with the shares trading 4.74% higher from the previous close t ₹2,165.35 each at 12:20 pm today.

Similarly, SpiceJet’s share prices opened slightly above the intraday low level of Rs 31.80 per share on BSE, at ₹31.95, and had soared 5.6% to Rs 33.25. When writing this article, the share traded at Rs 32.92 per share, 4.5% higher than the previous close.

Jet Airways India, which plans to return to the Indian skies after being grounded for three years following a bankruptcy, saw its shares locked in the upper circuit limit. The aviation stock opened lower at Rs 57.37 against the previous closing price. However, the shares gained momentum and hit a 5% upper circuit limit of Rs 60.59 at 9:28 am.