After surviving the chaos of the pandemic, the world’s biggest airlines are facing a new crisis before the last one is even over.
Russia’s invasion of Ukraine has sent the price of oil rocketing to a 14-year high and set off a sequence of unprecedented flight bans around the world.
Investors have taken fright and sent airline shares tumbling, leaving the industry at the mercy of a global crisis for a second time in as many years.
“We have dealt with the pestilence, only to be visited with a war,” said Ryanair chief executive Michael O’Leary. “I think it’s going to be very difficult for most airlines for the next 12 months.”
Airlines are used to dealing with geopolitical shocks and executives and analysts think demand for flying is strong enough to help passenger numbers recover from Covid-19.
But Russia’s invasion of Ukraine comes at a critical time as it threatens to hit demand for flying, testing the fragile balance sheets of the carriers and delaying the return to profits after the industry racked up an estimated £200bn of pandemic losses.
Lufthansa’s chief executive Carsten Spohr said the company faced “another challenge” from the “unimaginable events” as the airline last week warned over the uncertainty stemming from the conflict.
“We’re looking at a delay or somewhat of an interim setback in the airline path to financial recovery,” said Philip Baggaley, a managing director at S&P Global.
The immediate financial problem is the soaring price of crude oil, which has risen as high as $139 per barrel, at a time of broader inflationary pressures.
Fuel can represent up to 35 per cent of airline operating costs, according to Scope Ratings and several carriers in Europe changed their hedging policies after being stung by a collapse in the price of oil and demand…
