Rising Fuel Prices Spook Airline Outlook
Rising Fuel Prices Spook Airline Outlook
Issue Overview
The leaves are still green across most of the U.S. But how long will U.S. airlines stay in the black?
No worries yet about red ink, according to the latest update from carriers. But profits are clearly under pressure as fuel prices rise again. Demand thankfully remains healthy, though with some caveats, including disruptions in the Hawaiian tourist market following deadly fires in Maui. Southwest did express some disappointment with the pace of close-in leisure bookings last month. Its overall assessment of demand, however, was “healthy.” But again, the fuel demon is back on the prowl, leading Alaska Airlines, for one, to downgrade its third quarter profit forecast quite significantly.
Looking back at the first half of 2023, Qantas and Air New Zealand both performed well, pairing their long-held strength in domestic markets with the fruits of a longhaul intercontinental travel boom. The U.S. market, specifically, has been a big winner for both airlines this year. In the Nordic region, rivals SAS and Norwegian Air both capitalized on robust demand, reporting healthy profit margins. Aegean’s springtime margins were exceptional, benefitting from a surge in inbound tourism to Greece — and even a hint of strength in outbound demand from Greek travelers.
Chinese airlines are making money again — those with primarily domestic exposure, anyway. China’s economic challenges are mounting, and its international airline markets are still deeply depressed. But domestic air travel appears rather robust. Ditto for air travel in Brazil, giving Azul lots of confidence that the future will be bright.
The embattled and woefully short-staffed FAA will have a new chief, pending Senate approval. United’s pilots will soon vote on whether to accept a new contract deal. Leasing maven Steve Hazy doesn’t have kind words to say about some of Boeing’s leading products. Mexico City faces more government-imposed restrictions at its main airport. JetBlue is saying adios to Cuba. But Air Canada’s Montreal hub is saying hola to Madrid.