Airlines boosted by pent-up demand and cheaper fuel

Europe’s airlines are set for a much more profitable summer as pent-up demand for travel translates into higher ticket prices and airport capacity restrictions continue to ease. The stronger outlook for fares, coupled with lower fuel costs, led BofA Securities analyst Muneeba Kayani to increase operating profit targets for the continent’s major airlines by 14%. Airline bosses should report much stronger bookings for summer in a series of upcoming earnings calls and are “unlikely” to pass on savings they stand to make on jet fuel, which has fallen in price by around 17% since the start of the year, Kayani said. Low-cost carrier easyJet led the way this week, saying pre-tax profit in the year to September would be ahead of current market expectations of GBP260m, which itself is an uplift from the GBP126mn it was expected to generate in January. The company, which last summer incurred GBP133m of disruption costs as it compensated passengers for delayed or cancelled flights at overstretched hubs, said it will be back to pre-pandemic capacity levels this summer, having recently completed its “largest ever crew onboarding campaign”. It flew around 1,600 flights a day during the Easter holidays, with capacity in the UK already back to pre-pandemic levels and yields ahead of where they were in 2019. The recovery for low-cost carriers has been quicker than for former flag carriers such as BA-owner International Consolidated Airlines, Lufthansa and Air France-KLM, which have had to wait much longer for restrictions on long-haul flights to ease, particularly to China. LCCs are pulling ahead of legacy competitors in Europe because “they operate a less complex business model, have greater flexibility in where they place their aircraft and price to create demand”, noted John Grant, a senior analyst at flight data specialist OAG.<br/>