Rising fuel prices hit earnings, but there’s a silver lining for OEMs

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Introduction
July 30, 2018, © Leeham Co.: Fuel prices are spiking and it’s already causing airlines to adjust growth and fleet plans. But rising fuel prices could mean orders for slow-selling aircraft might pick up. Still, there are mixed signals on this front.
Summary
  • American and Southwest airlines are curbing growth and American is deferring airplanes due to rising fuel prices.
  • Alaska Airlines reported fuel prices were up 10 consecutive quarters, adding $850m to expenses.
  • Fuel prices were just under $80bbl on the US spot market last Thursday.
  • The inflection point between keeping current generation planes and ordering new ones with more efficient engines is fast approaching.
  • This could be a boost to the slow-selling Airbus A330neo and accelerate demand for the Embraer EJet-E2 and the Airbus A220 (nee Bombardier C Series).

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