An American Airlines Boeing 787-9 Dreamliner prepares to land at Miami International Airport on December 10, 2021 in Miami, Florida.
Joe Raedle | beautiful pictures
Airlines trying to find a way out of two years of raging pandemic are now facing the most expensive jet fuel costs in more than 13 years.
Russia’s Invasion of Ukraine last month caused a global crisis around fuel supplies.
Some analysts expect US carriers to cut their first-quarter profit or revenue estimates in the coming weeks after fuel costs rose 32% last week alone. Costs are generally the second largest for airlines, after labor.
“Higher fuel volumes will detract from better revenue in the short term, leading to a slight decline in estimates to 1Q22,” airline MKM Partners analyst Conor Cunningham wrote in a note.
Soaring fuel prices – more than 50% so far this year – are the latest challenge for carriers expecting more returning travelers this year as the number of Covid-19 cases reduction.
Aviation stocks have been one of the hardest-hit sectors in recent weeks as Russia’s invasion through markets tumbled into turmoil. United AirlinesThe network, which has the largest international network of any U.S. carrier, fell more than 17% last week. Delta Airlines the stock lost 13% last week and American Airlines shares fell 15%. Meanwhile, the S&P 500 is down 1% year-on-year.
Airlines are constrained on how much they can raise fares as they kick passengers back into the skies.
In the second quarter, the US domestic schedule was flat from 2019 “and we suspect a large reduction in capacity as a result of increased competition for leisure customers,” said Andrew Didora, a leading global analyst. no Bank of America said in a research report Monday.
Didora said demand will outpace supply, especially during peak idle times, “but it won’t generate prices that are nearly enough to offset the fuel move.”
The second and third quarters, which coincide with the spring and summer breaks, are when US carriers generate most of their revenue.
It can take months before travelers feel the price of fuel in their tickets. Aviation analyst Helane Becker of Cowen & Co. noticed a delay of about 4 months before fares caught up.
“Therefore, it is likely that the next few months will be financial, despite the strong traffic,” she said in a note on Friday.
