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Pressure on airline profitability eases but fuel prices worrying
November 10th 2021
The pressure on global airline profitability eased in the third quarter but share prices slid as investors worried about the high price of jet fuel. Read More » The latest Airlines Financial Monitor from the International Air Transport Association (IATA) shows aggregated airline financial losses diminished against the previous three months with some carriers reporting their first profitable quarter since the start of the COVID-19 crisis. A sample of 27 airlines suggested the industry-wide earnings before interest and tax (EBIT) margin improved to minus 2% of revenues in the third quarter, driven by passenger recovery on some domestic and short-haul routes. However, the report warned a sharp increase in jet fuel prices was boosting operating costs and represented a risk to a further recovery in profitability in the current quarter. “Average monthly jet fuel price and Brent crude oil price continued to climb higher in recent weeks, and is currently well above pre-crisis 2019 levels,’’ the report said. “At the beginning of November, the price per barrel of jet fuel was US$96.1, up 70% year-to-date. Many airlines have been voicing concerns about the impact of rising fuel costs – airlines’ largest operating cost item – on their financial recovery.” The report noted the fourth quarter tended to a seasonally weaker period for airline passenger revenues and the fuel price increase represented an unwelcome challenge. The fuel threat was also seen as a factor in a fall in global airline share prices in October. The performance gap between the broader equity markets and airlines widened from a broad-based fall in stock prices across all regions. In the Asia-Pacific, airline share prices in October declined 3.2% versus September and 6.5% since the start of the year.
