North America Leads As Airline Financial Performance Improves Sharply
Airline financial performance is improving strongly according to Q1
A sample of 81 airlines shows that industry financial performance
improved significantly on the year ago period at both the operating and profit
levels. The increase was driven by North American airlines, where
consolidation, cost-cutting and lower fuel costs has resulted in a significant
boost to profitability.
Airline share prices fell 5% in June compared to May, but are still up
10% on a year ago. The decline during the recent past is due to small rallies
in jet fuel prices as well as the strengthening USD.
For U.S. carriers, the strengthening dollar could hamper international
air travel, while for non-U.S. carriers, there could be an increase in
USD-denominated costs. More recently, however, airline share prices have been
falling because of investor profit-taking, particularly in the U.S.
May saw a robust increase in pax capacity compared to April; once again
mostly on international markets (0.9% month-on-month). Carriers in all regions
experienced capacity expansion, with European airlines seeing the slowest
growth, consistent with weakness in demand.
Growth in available seats accelerated further in May. Although there
were fewer new aircraft deliveries (122) compared to April (146), there was a
decrease in net storage activity.
More specifically, in May there were 81 aircraft going into storage,
while in April that figure was much greater at 116. There were also 118
aircraft coming out of storage in May, compared to 112 in April.
Growth in seats accelerated to a 10% annualized rate in May, which if
sustained could put downward pressure on aircraft utilization