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Africa|Environment|Financial|Reinforcing|supply-chain|transport
Africa|Environment|Financial|Reinforcing|supply-chain|transport
africa|environment|financial|reinforcing|supply chain|transport

World airlines body reports improving revenues but increasing fuel costs in the sector

10th November 2021

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The International Air Transport Association (Iata) has reported, in its Airlines Financial Monitor October 2021, that the preliminary results for the third quarter of this year indicated that, in quarter-on-quarter terms, financial pressures on the world’s airlines continued to ease as countries began to bring the Covid-19 pandemic under control. However, the price of jet fuel continued to increase. (Iata is the representative body for the global airline industry.)

While the airline industry-wide earnings before interest and taxes (Ebit) margin during the second quarter (Q2) of this year had been –68%, initial results for the third quarter (Q3), involving a sample of 27 airlines, showed a huge improvement to just –2%. For North American carriers, the Ebit margin in Q2 had been –94%, but in Q3 it had been +1%. For airlines in the Asia-Pacific, the Ebit margin had gone from –31% to –22% over the same period, while the respective figures for Europe had been –57% and +1% and for Latin America they had been –76% and +14%. Africa and the Middle East were not listed separately but combined as “others”. The airlines under this rubric went from a Q2 Ebit margin of –86% to a Q3 Ebit margin of +20%.

“The improvement has been driven by passenger travel recovery on some domestic and short-haul routes where travel restrictions were lifted during the traditionally busy Q3,” observed the report. “North American airlines were amongst the best performers, benefitting from the traffic in the US domestic market despite a negative impact from Covid outbreaks in [the] Aug[ust]-Sept[ember] period. The US airlines’ bottom line was also boosted by [the] government payroll-support programme. European carriers also recorded a robust recovery on the back of rising intra-European traffic.”

Losses in operating revenues continue to be greater than cuts in airline operating costs. Overall, airline revenues in Q3 where 29% below those of the same quarter in 2019, but operating costs were only 18% down. However, while air passenger revenues were 34% below the 2019 levels, air cargo revenues were 65% higher, because of strong demand. Moreover, during Q2, airline revenues had been 46% down on the figure for Q2 2019 so the Q3 figure represented a “robust” improvement.

On the other hand, jet fuel prices have increased sharply. They are now 70% higher than at the start of the year. Indeed, jet fuel prices are now significantly higher than they were in 2019, before the pandemic hit. At the start of this month, jet fuel had reached a price of $96.1/bl. The price rise has been driven by rapidly recovering demand, resulting from markets around the world reopening and economic activity reviving, coupled with a still constrained supply.

“[O]ther variable costs have also been rapidly returning with the traffic restart, reinforcing the need for all partners in the air transport supply chain to carefully manage costs in a still weak revenue environment,” cautioned Iata. 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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