Motilal Oswal
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March 13, 2019 12:23 PM | Aviation

Ban on Boeing 737 Max will not have significant impact on industry; SpiceJet top pick: Indianivesh

Discussing the impact of DGCA's decision banning the use of all Boeing 737 Max aircraft, Mayur Milak, Senior Research Analyst, Indianivesh Securities, said that the move may not severely affect the balance sheet of the companies grounding these planes.

Milak said while it is sentiment negative for SpiceJet, the company could be compensated for the losses it will incur because of this ban.

"While it is chaos at the passenger end, it may not be a major P&L impact for companies grounding the planes. In fact, it adds to everybody’s gains because yields are hardening. Moreover, crude prices too have corrected and the companies are expected to report much stronger Q4 numbers," said Milak.

The DGCA has banned Boeing 737 Max operations effective from 4 pm today.  As of now, the US and Canada remain the only geographies where Max operations are still prevalent. However, Boeing said the aircraft is safe and that it was conducting its assessments.

Civil Aviation Ministry will conduct a meeting with Jet Airways and SpiceJet at 4 pm today to discuss the backup plan or the substitute aircraft which will be needed to replace the Boeing 737 Max aircraft.

"The top pick for the house is SpiceJet, followed by Indigo. SpiceJet remains a strong buy at current levels with a target price of Rs 140-150," said Milak.

Globally, Milak thinks Boeing may not be impacted too much as "the numbers would come back once they reassure that the aircraft model is safe to fly after a fortnight or so." "Boeing Max is one of the largest selling models internationally," he added.
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