Airlines Show Resilience Amid Disruptions

Strategic Insights -

CNBC Anchor Ross Westgate discussed the impact of disruptions on airlines, particularly British Airways and Ryanair, with Chris Avery, aviation analyst at JPMorgan. Despite severe disruptions during the foiled terror alert on August 10th, Ryanair reported a 23% rise in August passenger numbers. British Airways, on the other hand, is expected to post its traffic numbers later that day, with Avery predicting an impact on the airline's performance.

Key Takeaways:

  • Ryanair reported a 23% rise in August passenger numbers despite disruptions, while British Airways is expected to post a negative impact on its traffic numbers due to the same disruptions.
  • Chris Avery, JPMorgan's aviation analyst, expects British Airways to report a significant effect from the disruptions, potentially leading to lost revenues and costs similar to those experienced in August 2005.
  • The market has shown resilience, with European network airlines and easyJet experiencing a 10-15% increase in stock prices since August 10th.
  • Avery suggests that investors may have already discounted the impact of the disruptions, with the market showing confidence in the airline industry's continued growth.
  • Avery is cautious about the airline industry's prospects for the winter season, citing concerns over the high demand for travel and the potential for gas and electricity bills to increase.
  • The fall in oil prices has provided some relief for airlines, but Avery notes that kerosene prices have trebled over the past five years, and the current price drop is not significant enough to have a major impact.
  • Avery highlights the looming problems with British Airways' pension fund deficit and potential industrial disruption related to employee benefits.
  • Avery believes that the stock prices of airlines, including British Airways, may be fully valued, considering the potential problems ahead.

Statistics:

  • 1,200-1,300 flights were canceled due to the disruptions, according to Herbert Westgate.
  • British Airways reported lost revenues and costs of approximately $40 million in August 2005 due to similar disruptions.
  • The current kerosene price is around $700 per metric ton, which is a decrease from the peak price of $740 in recent months.
  • European network airlines and easyJet experienced a 10-15% increase in stock prices since August 10th.
  • Chris Avery expects the airline industry's growth to slow down due to the high demand for travel and potential increases in gas and electricity bills.

Sources:

  • CNBC/DOW JONES BUSINESS VIDEO
  • Voxant, Inc.
  • JPMorgan
  • British Airways
  • Ryanair
  • easyJet
  • Air France
  • Lufthansa