Europe: Airline investors should stay away
Even as the oil price climbs, jet fuel keeps getting cheaper for Europe’s airlines. But consumers and not investors are the beneficiaries. Unlike their US peers, European airlines typically hedge their fuel costs 12 months to 18 months ahead of time. The budget carriers, led by Ryanair, are particularly active—the result of their sharper focus on costs and stronger balance sheets, which allow better terms with banks. A year into the oil-price recovery, they should now be reaping the benefits. Ryanair, whose cut-price business model was inspired by Southwest, said Monday its fuel costs would fall by about E65m during the year through March 2018, even on top of E160m in savings during the current fiscal year. That is based on 87% of its expected fuel costs being hedged at an average price equivalent to about $50 a barrel; Brent crude currently fetches $57 a barrel. The problem is that these benefits are being given away—and more—to consumers in an environment of feverish competition. <br/>
https://portal.staralliance.com/cms/news/hot-topics/2017-02-07/general/europe-airline-investors-should-stay-away
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Europe: Airline investors should stay away
Even as the oil price climbs, jet fuel keeps getting cheaper for Europe’s airlines. But consumers and not investors are the beneficiaries. Unlike their US peers, European airlines typically hedge their fuel costs 12 months to 18 months ahead of time. The budget carriers, led by Ryanair, are particularly active—the result of their sharper focus on costs and stronger balance sheets, which allow better terms with banks. A year into the oil-price recovery, they should now be reaping the benefits. Ryanair, whose cut-price business model was inspired by Southwest, said Monday its fuel costs would fall by about E65m during the year through March 2018, even on top of E160m in savings during the current fiscal year. That is based on 87% of its expected fuel costs being hedged at an average price equivalent to about $50 a barrel; Brent crude currently fetches $57 a barrel. The problem is that these benefits are being given away—and more—to consumers in an environment of feverish competition. <br/>
