News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors

Airlines Financial Monitor (December 2021 - January 2022))

01/17/2022 | 04:35am EDT

Airlines Financial Monitor

December 2021- January 2022

Key points

  • The latest financial results confirm that the pressure on the industry's operating profitability eased in Q3 2021. In the sample of 87 airlines, the operating loss - improved from 13.6% of revenues in Q2 to 2.6% in Q3.
  • The Global airline share price index picked up in January 2022 amid investors' confidence that Omicron-related disruptions might have a smaller impact on the travel industry than previously expected. Nevertheless, the index remains 30% below pre- crisis levels.
  • Jet fuel prices also rebounded from the Omicron-related dip in December and are currently at the highest level since late-2018. The elevated price is adding extra pressure on airlines' operating costs just at the time when travel demand is being hit by renewed travel restrictions.

Global airline share price index rebounds as fears over Omicron disruptions ease

Airline Share Prices

Index

% change on

US$ indices (Jan 2014=100)

Jan 11th

vs Dec 10th vs Dec 2019 start of year

World airlines

94.7

7.0%

-30.0%

+5.8%

Asia Pacific airlines

76.4

16.2%

-30.5%

-0.5%

European airlines

81.4

-0.3%

-28.1%

+13.4%

North American airlines

119.6

7.8%

-28.7%

+6.4%

FTSE All World $

190.8

0.3%

+31.9%

-0.9%

Index (Jan 2014=100)

200

180

160

140

120

100

80

60

2014

2015

2016

2017

2018

2019

2020

2021

2022

FTSE All World $

World airlines $

Source: Refinitiv Eikon Datastream

  • The Global airline share price index started the year 2022 on a positive note, rising by 5.8% in the first half of January. The improvement was driven by investors' confidence that the new Omicron variant will lead to fewer hospitalizations than other strains and therefore might cause less disruption than previously expected.
  • The global index hides some regional variation. Shares of European airlines rose the most significantly in January (13.4%), driven by renewed optimism about the industry's recovery. Meanwhile, airline stocks in Asia Pacific fell by 0.5%, reflecting concerns about the impact of a potential interest rate hike in the US.
  • Taking a step back from the short-term developments, the bigger picture remains that airline stocks continue to trade about 30% below the pre-crisis level in all regions.

Industry-wide operating income improved in Q3 amid gradual air travel recovery

Historical Profitability, full sample

The latest financial results confirm that pressure on

15

Net profit, US$bn

EBIT margin, % of revenues

60%

airlines' operating profitability eased in Q3 thanks to a

10

gradual improvement in passenger traffic and a

5

0

0%

booming air cargo business. The industry-wide

-5

-10

-60%

operating loss was 2.6% of revenues over the July-

-15

September period, compared with a 13.6% loss in Q2.

-20

-25

-30

-120%

The EBIT margin improved the most in Europe which

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

airlines benefitted from recovering air travel demand on

Source: IATA Economics using data from the Airline Analyst & Refinitiv Eikon

intra-European routes. The European metric rose from

Airline Financial Results

-30% to 3% between Q2 and Q3. The improvement was

smaller in North America where the Delta variant's

Number of

Q2 2021

Q3 2021

spread delayed the air travel recovery. Asia Pacific

airlines in

Regions

EBIT

Net post-tax

EBIT

Net post-tax

airlines showed the weakest operating result in

sample

margin1

profit2

margin1

profit2

aggregate (-20% of revenues), notably due to still very

33

North America

-7%

1,073

1%

2,941

restricted international travel to, from, and within the

28

Asia-Pacific

-15%

-1,866

-20%

-3,170

region.

14

Europe

-30%

-4,634

3%

31

8

Latin America

-18%

-700

-8%

-1,938

Looking ahead, some of the North American airlines

4

Others

-20%

-118

4%

-31

improved their revenue forecast for Q4, stating that

87

Sample total

-13.6%

-6,245

-2.6%

-2,167

1% of revenues

2US$ million

travel demand remained robust during the holiday

season despite Omicron disruptions. That said, costs

Sources: The Airline Analyst, IATA

pressures are expected to rise as well.

1

IATA Economics: www.iata.org/economics

Economy class continues to recover faster than premium class at the global level

Global pax numbers by service class, %ch. versus the same month in 2019

20%

3.5

0%

3

-20%

2.5

-40%

2

Economy class

1.5

-60%

1

-80%

Premium class

0.5

(First & Business)

-100%

0

Ratio of premium vs. economy class

fares (global)

  • Taking a closer look at different sources of passenger revenues, premium class passenger traffic continues to lag the recovery in the economy counterpart.
  • Following the peak of the crisis in April 2020, premium was briefly recovering faster than economy. This can be partly explained by premium tickets becoming relatively less expensive than economy tickets (see the blue line in the right-hand chart). However, the price advantage has largely disappeared since July 2020 and the economy class recovery started to outperform. The performance gap between the two has been broadly unchanged since then, at 8-10 percentage points.

Source: IATA Economics using DDS

Jet fuel prices are on the rise again, putting upward pressure on airline costs

US$/bbl

Index (Jan 12 = 100, inverted)

Jet fuel and Brent crude oil prices bounced back in

160

90

January, with the former currently at the highest level

95

140

since late-2018. As with airline stocks, the price

recovery has been driven by rising optimism about the

100

120

short-lived impact of the Omicron variant on global

Jet fuel (LHS)

105

Weaker US dollar

economic activity, including fuel demand.

100

110

The elevated jet fuel price adds pressure on airlines'

115

80

operating costs just at the time when the revenue side is

60

120

being hit by Omicron-related flight cancellations. This

125

might delay airlines' financial recovery from the crisis.

40

US dollar trade-

130

In 2021 as a whole, jet fuel and Brent crude oil prices

Brent crude oil (LHS)

weighted index (RHS)

surged by 68% and 63% respectively compared with

20

135

2015

2016

2017

2018

2019

2020

2021

2020, as demand increased with easing lockdowns while

2014

2022

OPEC+ supply remained tight.

Sources: Platts, Refinitiv Eikon Datastream, as of January 11th

The industry burned cash in Q3 2021, but significanly less than in 2020

Airline Cash Flow1

In the sample of 58 airlines, the industry-wide net

Number of

Q2 2021

Q3 2021

cashflow from operating activities was at -1% of

airlines in

Regions

Net cash

Capex

Free cash

Net cash

Capex

Free cash

revenues in Q3. This represents a significant

sample

flow2

flow

flow2

flow

improvement versus Q3 2020 (around -50%). However,

16

North America

40%

11%

29%

-8%

6%

-14%

23

Asia-Pacific

5%

11%

-7%

2%

11%

-9%

it is a weaker outcome compored with Q2, partly due to

10

Europe

21%

14%

7%

9%

7%

2%

a negative impact of the Delta variant on ticket sales in

5

Latin America

-12%

7%

-19%

-2%

13%

-16%

some markets.

4

Africa & Middle East

40%

13%

26%

7%

1%

6%

58

Sample total

26%

11%

15%

-1%

8%

-9%

1% of revenues

2From operating activities

International bookings for future travel have been falling

Sources: The Airline Analyst, IATA

amid new travel restrictions. This will negatively impact

some airlines' cashflow over the northern hemisphere

winter.

IATA Economics

economics@iata.org

17 January 2022

Get the data

20-year passenger forecasts

IATA Economics Mobile App

Access data related to this briefing through

To find out more about our long-term passenger

100% free access to our analysis & briefing for

IATA's Monthly Statistics publication:

forecasts, and to sign up, visit:

iOS & Android devices. For more details or to

www.iata.org/monthly-traffic-statistics

www.iata.org/pax-forecast

download, see here:

2

Terms and Conditions for the use of this IATA Economics Report and its contents can be found here:

IATA Economics: www.iata.org/economics

By using this IATA Economics Report and its contents in any manner, you agree that the IATA Economics Report Terms and Conditions

apply to you and agree to abide by them. If you do not accept these Terms and Conditions, do not use this report.

Disclaimer

IATA - International Air Transport Association published this content on 17 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 January 2022 09:34:10 UTC.


ę Publicnow 2022
Latest news "Companies"
12:36pCarrefour accelerates in quick commerce with Flink, Cajoo deal
RE
12:28pZHEN DING RESOURCES INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
AQ
12:26pCapital Gearing Trust Plc - Issue of Equity
PR
12:26pMental Well-Being Group Builds Awareness and Support for PRA Group Employees Worldwide
PR
12:26p1847 HOLDINGS LLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)
AQ
12:26pBioStem Technologies Reports March 31, 2022 Record Quarterly Financial Results
GL
12:26pBioStem Technologies Reports March 31, 2022 Record Quarterly Financial Results
GL
12:25pGUSKIN GOLD CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)
AQ
12:24pUS NUCLEAR CORP. : Entry into a Material Definitive Agreement, Financial Statements and Exhibits (form 8-K)
AQ
12:23pStrategic Equity Capital Plc - Transaction in Own Shares
PR
Latest news "Companies"