US airlines are looking at profits falling by an average of 27%. Across the rest of the world predictions are as bad if not worse. Airlines are looking to retire older aircraft more quickly as costs rise.
Many European low-cost airlines will face rapidly rising costs in an environment that’s also massively competitive, leaving little room for making price increases.
Many see this as the perfect storm for airlines like Norwegian, already making losses all they can do is see them worsen.
The legacy carriers can also be expected to make fast revisions to their old aircraft fleets if fuel prices continue to spiral upward, which seems likely. The residue fleets of 747’s operated by BA, Lufthansa and KLM will be under pressure as costs rise.
American Airlines CEO Doug Parker’s prediction that $5 billion in profits a year would be normal, is already looking empty barely 10 months since he spoke the fateful words!
The cause is the Trump Administration decision to depart from the agreement with Iran to prevent its nuclear weapons ambitions. The sanctions will restrict the countries oil export markets and that in turn tightens global oil supply which forces up the price.