Hello and welcome to our Monday Briefing for the week beginning 30 July 2018, summarising the main developments in air travel over the past week, and a look to the week ahead.
Is the aviation industry heading for its next crisis?
The notoriously cyclical aviation industry has had a relatively good run of late.
There have been some failures such as Air Berlin and Monarch, and there are others that are clearly struggling. However, the majority of major airlines have experienced consistent profitable expansion. Alitalia, of course, continues to manage to suspend economic reality and survive in a financial theme park of its own.
Buoyant demand and relatively low fuel prices combined with new aircraft have facilitated a significant number of new routes, notably on transatlantic. BA continues to add more Boeing 787 routes, with the launch of Pittsburgh in April 2019.
However, there was a string of bad news from airlines around the world last week.
American Airlines announced a 45% fall in its 2nd quarter pre-tax profit to $769m. The principal cause is its fuel bill which has increased by more than 40% (approximately $2 billion) this year.
Ryanair, whose pilots are due to strike again this coming Friday 3 August, reported a 20% fall in first quarter profit to €319 million. Ryanair cited a shopping list of fuel prices, weather, Air Traffic Control strikes and the World Cup. Ryanair has also issued protective notices to its pilots and cabin crew that it plans to cut the number of aircraft at its Dublin base this winter from 30 to 24.
Singapore Airlines, widely regarded for having a near impeccable financial track record, reported a 52% reduction in operating profit for its first financial quarter.
There were similarly subdued updates from Flybe and WizzAir. There are signs that at the very least capacity growth is moderating. Most airlines should be able to absorb higher fuel prices. However, should this be combined with a demand shock, there could be trouble ahead.
On a related note, International Airlines Group reports its 2nd quarter financial results this coming Friday.
Sunday Times: Thomas Cook mulls sale of airline
The Sunday Times has reported Thomas Cook is considering a partial sale of its airline to help pay down debt.
At Gatwick, Thomas Cook has a relatively small long-haul presence, serving Cancun, Cayo Coco, Holguin, and Orlando, It also has a number of short-haul routes. It has also built up a substantial long-haul presence at Manchester serving Boston, Cancun, Los Angeles, New York, Orlando, San Francisco and Seattle.
The Sunday Times’ track record of aviation business stories citing “industry sources” is patchy at best. However, very often these stories are deliberately leaked (with a non-denial denial on the record) to drum up interest from potential buyers.
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