Airline profit hopes fade with $125 oil as US mulls ban

Airlines are seeing prospects for a strong profit rebound from two years of coronavirus turmoil rapidly slip away after the price of oil reached $125 a barrel on Monday. An oil shock triggered by Russia’s war in Ukraine is the latest blow to carriers that have already had to cancel flights and reroute long-haul journeys to avoid shuttered airspace. The price of crude spiked after the US said it would consider a boycott of Russian supplies. Earnings are at risk in Europe, where higher fuel costs will add to widespread flight disruption, while carriers in the US and Asia are largely unhedged and will feel the full impact of price rises. Airline shares tumbled in all three regions, extending losses that have been piling up for the past several weeks. Oil neared $140 a barrel at one point after the US said it was mulling a ban on Russian crude imports. Wizz Air reversed its no-hedging policy on Monday to protect from further increases in oil prices. The hedges will cap fuel-cost exposure for the next four months. Other European airlines are feeling the pinch, with Ryanair and Lufthansa altering schedules. Surplus jets will be redeployed into Western Europe, setting up a supply-demand imbalance. That threatens to hurt ticket prices in a peak summer season on which travel firms have been pinning hopes for a rebound. Before the Ukraine conflict, the IATA was considering revising its estimate issued last October for industry-wide losses of $11.6b this year, potentially narrowing the figure. That now seems unlikely. “Investors believe that airlines will likely pass on the spike in crude costs to consumers in the form of fuel surcharge but are worried about the price elasticity of demand,” Citigroup analysts said in a research note Monday after meetings in the US.<br/>