European airlines fail to capitalise on lower oil price
07 January 2015 London
Image: Shutterstock
European airlines are not able to take advantage of the windfall provided by dramatically lower oil prices, according to research from Markit.
The low oil price, almost 50 percent cheaper than it was at the beginning of 2014, should be positive news for airlines going forward as the commodity makes up almost 30 percent of their operating costs.
Euro weakness has offset some of the gains in the oil price declines but European airlines are also counting the cost of labour disruptions. Labour is the second largest operating cost after oil and has negatively affected European carriers.
Air France and Lufthansa are both implementing cost cutting exercises and strategies aimed to fight competition stemming from low the cost airlines, such as Ryanair and easyJet.
The percentage of Air France-KLM shares out on loan currently stand at 7.9 percent, down from the highs of over 10.5 percent reached during 2014.
The share price recovered in H2 2014 as the oil price declined, but the stock was down 18.9 percent in total for the year.
Lufthansa’s share price is down 22 percent year-to-date. But the stock is up 7.3 percent since short sellers started covering from 11 November 2014.
Since then, shares outstanding on loan decreased to 2.3 percent. This is as oil prices fell 32 percent.
Shares outstanding on loan for easyJet have decreased to 1.3 percent through 2014 with the share price increasing more than 25 percent since the middle of the year.
Ryanair is the standout airline performer in Europe in 2014 as the company’s share price increased by 43 percent. According to Markit, there were “negligible” levels of shares outstanding on loan during the year, peaking at just 0.3 percent.
US airline operators feature in the top 30 percent of companies that have outperformed global stocks since September 2014.
The highlights among this trend are US airlines Delta, United and American Airlines, which have outperformed their airline peers so far this year, returning 58, 51 and 65 percent, respectively.
Oil price declines, which are not diluted by a weaker currency in Europe, have positively affected these stocks and over the last month, United and Amercan Airlines have advanced a further 14 and 18 percent, respectively.
Analyst at Markit, Relte Schutte, commented: “Interestingly, Ryanair does not see a convincing factor rank with a strong relationship to oil movements as the firm operated successfully at higher oil prices and operates a vastly younger fleet compared to airlines such as Delta, according to company statements.”
The low oil price, almost 50 percent cheaper than it was at the beginning of 2014, should be positive news for airlines going forward as the commodity makes up almost 30 percent of their operating costs.
Euro weakness has offset some of the gains in the oil price declines but European airlines are also counting the cost of labour disruptions. Labour is the second largest operating cost after oil and has negatively affected European carriers.
Air France and Lufthansa are both implementing cost cutting exercises and strategies aimed to fight competition stemming from low the cost airlines, such as Ryanair and easyJet.
The percentage of Air France-KLM shares out on loan currently stand at 7.9 percent, down from the highs of over 10.5 percent reached during 2014.
The share price recovered in H2 2014 as the oil price declined, but the stock was down 18.9 percent in total for the year.
Lufthansa’s share price is down 22 percent year-to-date. But the stock is up 7.3 percent since short sellers started covering from 11 November 2014.
Since then, shares outstanding on loan decreased to 2.3 percent. This is as oil prices fell 32 percent.
Shares outstanding on loan for easyJet have decreased to 1.3 percent through 2014 with the share price increasing more than 25 percent since the middle of the year.
Ryanair is the standout airline performer in Europe in 2014 as the company’s share price increased by 43 percent. According to Markit, there were “negligible” levels of shares outstanding on loan during the year, peaking at just 0.3 percent.
US airline operators feature in the top 30 percent of companies that have outperformed global stocks since September 2014.
The highlights among this trend are US airlines Delta, United and American Airlines, which have outperformed their airline peers so far this year, returning 58, 51 and 65 percent, respectively.
Oil price declines, which are not diluted by a weaker currency in Europe, have positively affected these stocks and over the last month, United and Amercan Airlines have advanced a further 14 and 18 percent, respectively.
Analyst at Markit, Relte Schutte, commented: “Interestingly, Ryanair does not see a convincing factor rank with a strong relationship to oil movements as the firm operated successfully at higher oil prices and operates a vastly younger fleet compared to airlines such as Delta, according to company statements.”
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