SpiceJet shares hit upper circuit, IndiGo up nearly 4% on airline credit boost from govt; all you need to know

Airline stocks like SpiceJet and IndiGo operator InterGlobe Aviation were trading higher on Wednesday, May 6, as investors cheered after the Union Cabinet announced a credit line guarantee scheme for airlines following the West Asia conflict.

The Union Cabinet on Tuesday approved the fifth version of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) to provide additional liquidity support to businesses, particularly MSMEs and the aviation sector, in the backdrop of the ongoing West Asia crisis.

The scheme, cleared by the Cabinet chaired by Prime Minister Narendra Modi, will facilitate additional credit flow of about ₹2.55 lakh crore, including ₹5,000 crore earmarked for airlines, according to an official release.

Briefing reporters after the Cabinet meeting, Union Minister Ashwini Vaishnaw said the scheme builds on the model implemented during the COVID-19 pandemic and is designed to provide timely liquidity without creating moral hazard.

“The most important thing about this model is that there is no moral hazard... the possibility of misuse is practically minimal,” Vaishnaw said.

“Its primary aim was to provide liquidity support… Till now, around 1 crore MSMEs have benefited from ECLGS,” the minister added.

Under ECLGS 5.0, the government will provide 100% guarantee coverage for loans extended to micro, small and medium enterprises (MSMEs) and 90% for non-MSMEs as well as the airline sector through the National Credit Guarantee Trustee Company Limited (NCGTC).

The scheme will cover additional credit extended by member lending institutions to eligible borrowers to help them manage short-term liquidity mismatches arising from global disruptions.

The quantum of additional credit support will be capped at 20% of the peak working capital utilised during the fourth quarter of FY26, subject to a maximum of ₹100 crore.

For airlines, the support can go up to 100% of their credit exposure, capped at ₹1,500 crore per borrower, subject to conditions.

Loans extended under the scheme will have a tenor of seven years, including a two-year moratorium for airlines. The guarantee cover will be co-terminus with the loan tenure, and no guarantee fee will be charged under the scheme.

The scheme will be applicable to loans sanctioned from the date of issuance of guidelines by NCGTC till March 31, 2027.

Airline stocks on Wednesday

IndiGo shares have jumped 3.6% to touch an intraday high of ₹4,393 apiece on Wednesday. SpiceJet shares, however, were trading at the 4.96% upper circuit at ₹12.70 apiece.

Shares of InterGlobe Aviation have surged more than 1%, while SpiceJet shares have fallen over 9% over the last week.

The decline in SpiceJet shares over the week came after the Delhi High Court dismissed pleas by the airline and its promoter Ajay Singh, directing the company to deposit ₹144 crore in its legal dispute with Kalanithi Maran and Kal Airways.