Pressure on the operating profitability of the world’s airlines lessened during the third quarter of last year (Q3 2021), the International Air Transport Association (Iata) reported in its latest Airlines Financial Monitor. However, jet fuel prices increased.
The improvement in operating profitability during Q3 was due to the gradual increase in air passenger traffic and a still-booming air cargo sector. During this period, the operating loss across the industry was 2.6% of revenues, whereas the loss during Q2 had been 13.6%.
Regarding earnings before interest and taxes (Ebit), European airlines recorded the greatest improvement in Ebit margin, from –30% during Q2 to +3% during Q3. This was the result of recovering demand on intra-European air routes. The impact of the Delta variant of Covid-19 delayed the air travel recovery in North America. The Asia-Pacific was the region which reported the worst aggregate operating result in Q3, with an Ebit margin that came to about –20% of revenues. This was the result of the still highly restricted air travel within, and to and from, the region.
Within the air passenger travel sector, traffic in the premium classes continues to recover more slowly than that in economy classes. There had been a brief period, after the crisis caused by Covid-19 had reached its peak in April 2020, when premium ticket sales had recovered more rapidly than those for economy, but that had been due to cuts in premium ticket prices. By July 2020 those price cuts had come to an end, and economy ticket sales began to “outperform” premium sales. Since then, economy class sales have maintained their advantage, pretty much with a margin continually between 8% and 10% above premium sales.
“In the sample of 58 airlines, the industry-wide net cashflow from operating activities was at –1% of revenues in Q3,” stated the report. “This represents a significant improvement versus Q3 2020 (around –50%). However, it is a weaker outcome compared with Q2, partly due to a negative impact of the Delta variant on ticket sales in some markets.”
But, in January this year, jet fuel and Brent crude oil prices “bounced back”. Jet fuel prices are now at their highest since late 2018. Over the whole of last year, jet fuel prices rose by 68% and Brent oil by 63%, in comparison to 2020. The combination of fuel price rises with the cancelling of flights due to the spread of the Omicron variant of Covid-19, “might delay airlines’ financial recovery from the crisis”, cautioned Iata.