Airline shares soften as oil price rallies

Passenger yields weakened around the world in April, reflecting the lower fuel related costs. Photo / Thinkstock

Airline share prices fell 1.5 per cent around the world last month as the United States dollar and oil prices rallied, but are still up 23 per cent on a year ago. Fares are also falling.

International Air Transport Association figures also showed continued gains in the United States and a positive turn-around in Asia Pacific.

"Declines in fuel costs, which had provided a boost to airline share prices in late 2014, are being offset by the strengthening US dollar," the Airlines Financial Monitor said. "For US carriers, the strengthening dollar could hamper international air travel, while for non-US carriers, there could be increases in US-dollar denominated costs."

Crude oil prices had fallen below US$50 a barrel in January, the lowest price seen for the past six years. Since then, there have been two rallies, one currently under way with crude oil prices rising 20 per cent in early May compared with the most recent low in March. Yesterday oil was trading at US$59.19 a barrel.

Air transport volumes continued to expand strongly, as freight tonne kilometres moderated after a spike in February.

Passenger yields weakened around the world in April, reflecting the lower fuel related costs.

In the US passenger yields had been broadly flat for the past 12 months. The recent weakness in yields likely reflects downward pressure from earlier declines in fuel related costs.

The downward trend in global fares in US dollars has continued. The global average fare has fallen from US$500 to US$420 since 2008.

Fare data excludes fuel surcharges and ancillary revenues.

The growth in available freight tonne kilometres moderated as available seat kilometres expanded strongly on domestic markets.

Growth in seats accelerated in March, which is also included in some of the data. The acceleration in growth in seats was due to a rise in new aircraft deliveries and a fall in net storage activity.

In February there were 128 new aircraft delivered compared with 144 new deliveries in March. In addition, a net 53 aircraft went into storage in February, compared to 42 in March.

Growth in seats accelerated to a 5 per cent to 6 per cent annualised rate.