US: Pricier fuel to test airline profits
US airlines are aiming to convince investors that surging fuel costs won’t knock a record stretch of profitability off course. Some investors say airlines won’t be able to raise prices fast enough to cover a roughly 55% increase in fuel costs from a year ago. The NYSE Arca Airline Index is down nearly 13% this year while the S&P 500 is up 3.2%. They expect carriers to commit to schedule cuts to address the rising costs when they report quarterly earnings this month. Delta is the first to report, on Thursday. “The first course of action may be to adjust their fall and winter schedule, while trying to raise fares in strong markets,” said Helane Becker, an analyst at Cowen & Co. “Delta has repeatedly hinted at this.” Executives have said higher fuel costs will factor into their capacity decisions after the peak summer travel season. “We’ve made money at fuel prices at $100 and we’ve made money at $40,” Delta CE Ed Bastian said recently. “There’s a resiliency and a stability to our business like never before.” But other costs are rising too. In addition to fuel, many airlines recently agreed to labor contracts that will see them pay more in wages and benefits. And a shakier forecast for geopolitics and international trade could hurt flight demand in the months ahead if companies cut back on business travel, analysts say.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2018-07-09/general/us-pricier-fuel-to-test-airline-profits
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US: Pricier fuel to test airline profits
US airlines are aiming to convince investors that surging fuel costs won’t knock a record stretch of profitability off course. Some investors say airlines won’t be able to raise prices fast enough to cover a roughly 55% increase in fuel costs from a year ago. The NYSE Arca Airline Index is down nearly 13% this year while the S&P 500 is up 3.2%. They expect carriers to commit to schedule cuts to address the rising costs when they report quarterly earnings this month. Delta is the first to report, on Thursday. “The first course of action may be to adjust their fall and winter schedule, while trying to raise fares in strong markets,” said Helane Becker, an analyst at Cowen & Co. “Delta has repeatedly hinted at this.” Executives have said higher fuel costs will factor into their capacity decisions after the peak summer travel season. “We’ve made money at fuel prices at $100 and we’ve made money at $40,” Delta CE Ed Bastian said recently. “There’s a resiliency and a stability to our business like never before.” But other costs are rising too. In addition to fuel, many airlines recently agreed to labor contracts that will see them pay more in wages and benefits. And a shakier forecast for geopolitics and international trade could hurt flight demand in the months ahead if companies cut back on business travel, analysts say.<br/>
