Airlines’ latest challenge: Rising jet-fuel prices2 min read

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A JetBlue Airways plane taxis next to American Airlines, Delta Air Lines and Alaska Airlines aircraft at Reagan National Airport (DCA) in Arlington, Virginia, on Monday, April 6, 2020.

Andrew Harrer | Bloomberg | Getty Images

The oil rally is taking jet-fuel along for the ride, posing another headache for airlines still struggling from depressed travel demand in the pandemic.

U.S. jet-fuel prices reached a nearly 13-month high of $1.67 a gallon on Wednesday, according to S&P Global Platts data, a climb led by an Arctic blast and winter storms that disrupted oil production, refining and transportation. Millions were left in the cold and the dark in Texas, which largely relies on natural gas for heat and power.

“We were expecting fuel to be at these levels by the second half of the year,” said Raymond James airline analyst Savanthi Syth. Costlier fuel can make it harder for airlines to stem their cash burn, a goal that has already been delayed due to weaker-than-expected demand.

Cost headwind

Demand rebound

Jet-fuel consumption in the U.S. so far this year is still off by almost a third from last year, according to a Citi report this week.

The supply disruptions were enough to drive up prices but for prices to sustain their climb, travel demand needs to rebound as well, said S&P Global Platts analyst Lenny Rodriguez. The Transportation Security Administration’s daily airport screenings have averaged more than 810,000 a day this month compared with 2.1 million during the same period last year.

That weak demand makes refining jet fuel compared with other oil products less attractive.

“This is the laggard for all the oil products,” Rodriguez said.

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