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How European, US airlines are raking in profits in 2023

Auto Journal by Auto Journal
August 15, 2023
in Business
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British Airways [Photo Credit British Airways]

British Airways [Photo Credit British Airways]

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European aviation reaches new heights as major airlines, including British Airways and Iberia, achieved robust financial performance in both low-cost and full-service sectors.

In a positive turn of events, the decline in oil prices since the 2022 Russian invasion of Ukraine has provided much-needed financial relief for airlines and this resulted in reduced operational costs and fares, igniting a surge in passenger demand.

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The resurgence isn’t limited to Europe; aviation in the United States has also bounced back significantly from the challenges posed by the COVID-19 pandemic, as all major carriers have reported strong financial outcomes in the second quarter of 2023.

A recent report from Cirium Aviation Analytics sheds light on the strong beginning of commercial aviation in Europe. Both short-haul and long-haul sectors are witnessing robust financial performances. This trend is mirrored in the low-cost and full-service sectors.

The International Airlines Group (IAG), a conglomerate housing British Airways and Iberia, announced an impressive quarterly profit of $1.37 billion, with a margin of 16.3%. Simultaneously, Air France-KLM declared a quarterly profit of $802 million and a margin of 9.6%. These remarkable figures bode well for the industry’s outlook in the latter half of the year.

European Airlines [Photo Credit British Airways]
European Airlines
The aftermath of the 2022 Russian invasion of Ukraine initially sent oil prices skyrocketing. However, a subsequent drop in prices has offered airlines the much-needed breathing space. This has enabled them to lower costs and fares, which in turn has spurred passenger demand.

Crossing the Atlantic, the aviation sector in the United States has firmly reestablished itself three years after the onset of the COVID-19 pandemic. All major carriers have recorded impressive financial results in the second quarter of 2023.

Strong results in the low-cost market

Notably, European low-cost giants easyJet and Ryanair have reported positive results in the second financial quarter of 2023. Despite economic uncertainties, both carriers have witnessed robust traffic and faced minimal challenges in filling their aircraft.

Amid concerns of a potential recession due to inflation, the demand for low-cost flights remains steadfast. Budget airlines, however, have managed to optimize their revenue per passenger effectively.

Ryanair’s average fare has experienced a 42% surge compared to the same period last year. Similarly, easyJet has maintained a substantial 23% increase in this category. While inflation plays a role in these price hikes, passengers have shown willingness to pay more for air travel.

Fuel price dip bolsters industry

A notable drop in fuel prices has substantially contributed to airlines’ improved financial outlook. In 2022, fuel prices reached unprecedented heights, exceeding $5 per gallon in May due to the Ukrainian conflict. The average cost for the first half of the year was $3.50 per gallon.

This year, prices dipped to slightly over $2 in May and have maintained an average of around $2.50 in the first half. However, not all of these savings have translated to lower fares for passengers. Despite enhanced financial outcomes, EasyJet reported increased fuel unit costs.

Despite this, reduced jet fuel expenses have undeniably aided airlines in trimming costs and enhancing profitability. These factors are crucial as the industry aims to recover from a collective loss of over $180 billion in the past three years. The recent positive financial results signal a promising trajectory for the aviation industry at large.

Read more on Airlines make epic comeback for summer travel

Tags: Around the worldcommercial airlinesTop premium

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