Aviation sector: a new global fuel cost crisis is coming
US airlines warn they expect a disappointing third quarter on the back of rising fuel costs due to higher crude oil prices and a deepening crisis .
Southwest Airlines said its August bookings were lower than expected and it cut its revenue per seat-mile expectations. United Airlines and Alaska Air Group have also issued warnings, as higher fuel costs are due to reduced supplies.
According to a filing with the SEC by United Airlines, the cost of jet fuel has increased more than 20% since mid-July, with the average fuel cost in the third quarter ranging between $2.95 and $3.05 a gallon. That compares to UAL's cost of $2.50 to $2.80 a gallon in July.
Rapidly rising crude oil prices and the resulting rise in jet fuel left little time for airlines to offset higher costs by revising ticket prices.
However, Bank of America analysts had already cut price targets for the airline sector a day earlier, citing rising jet fuel costs, so stocks, including United Airlines, rose Wednesday despite warnings that profits could have disappointed thanks to higher prices. By midday, however, shares of Southwest Airlines were down 2.60%.
Last month, data from the International Air Transport Association (IATA) and S&P Global Commodity Insights showed that global jet fuel prices averaged $119.82 a barrel for the week ending Aug. 4, a 23% increase over the previous month's data. It was also compared to an average Brent price of $85.55, for a crack spread of just over $34. However, at the end of the second quarter of this year, global air traffic was at 94.2% of pre-Covid levels.
Jet fuel is considered a middle distillate, a category of oil that has seen its U.S. inventories hover 15% below the five-year average for this time of year.
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The article Aviation sector: a new global crisis for fuel costs is coming from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/settore-aereo-arriva-una-nuova-crisi-mondiale-per-i-costi-del-carburante/ on Thu, 07 Sep 2023 06:00:49 +0000.