Some airlines have recently reported rising costs and a strain on finances due to rising fuel prices and the International Air Transport Association (IATA) said jet fuel prices remain almost 40 per cent higher than their level at the same time last year.
The association reported in its July report of the Airlines Financial Monitor that oil prices eased slightly again in July, but the upward trend remains in place and jet fuel prices dipped back below $90/bbl this month.
IATA said the upward trend in global oil prices since early-2017 has been driven by a combination of a gradual reduction in oil inventories, as well as geopolitical developments.
However, oil prices have fallen back slightly in recent months, reflecting the impact of an announced supply increase by Saudi Arabia as well as a stronger US dollar. Having risen as high as $94/bbl in May, the price of jet fuel is currently back around $89/bbl.
The association said to put the pressure on airline input costs into perspective, this is still around 38 per cent higher than its year-ago level.
IATA said the oil futures curve continues to point to a moderate decline in oil prices over the coming year or two.
In the July report the association also said initial Q2 2018 data points to a moderate squeeze on airline profitability compared to the same quarter a year ago. However, industry-wide cash flow generation increased this quarter compared with Q2 2017.
Global airline share prices rose for the first time since January and outpaced developments in the overall global equity index. The improvement in the airline share price index was dominated by North America, with modest gains in Europe & Asia Pacific. Airline shares are still 10 per cent lower than at the beginning of this year.
IATA said: “Notwithstanding rising input costs, there are signs of renewed downward pressure on passenger yields. Yields in the less price-sensitive premium-class cabin have generally proven to be more resilient than the economy cabin, despite signs of weakness in May.
“Passenger demand carried solid momentum into the peak Northern Hemisphere summer period, but freight demand is showing signs of some moderation.”
