Airline Stocks Soar On Iran Ceasefire As IATA Sees "Positive" Tailwinds, But Warns Jet Fuel Crisis Will Persist
Airline stocks are flying high in premarket trading in New York after the overnight ceasefire between the Trump administration and Tehran. The truce is a positive for the aviation industry, which has been locked in turbulence for six weeks, as surging jet fuel prices have crushed the margins of major carriers, forcing ticket and baggage price hikes and triggering travel chaos across the Gulf region.
"Even two weeks is a positive because we will see some flow of oil return," Willie Walsh, director general of the International Air Transport Association, told Bloomberg Television in an interview.
Walsh pointed out that even with a ceasefire underway, jet fuel prices "will remain elevated for some time."
"If crude has come down 16%, you like to think jet will come down by a similar figure, but it's still going to be a high price. That will mean higher ticket prices. It is inevitable," he warned.
Walsh also cautioned that jet fuel supply shortage risks remain elevated, with Asia seen as the most exposed region, followed by Africa and Europe. JPMorgan outlined "demand destruction" and how the energy shock spreads in a note here.
Even though WTI and Brent crude prices collapsed overnight, Walsh said normalization across the airline industry and energy markets will take time.
Delta Air Lines warned earlier that it expects to incur more than $2 billion in fuel costs through June, but noted that it has yet to change its full-year profit forecast because the outlook remains too murky.
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Malaysia Airlines' Nasaruddin Bakar warned that "even if the war stops, it's going to take many, many more months for the price to stabilize."
Thai Airways CEO Chai Eamsiri pointed out, "This time is about the infrastructure that was destroyed. It will take some time to bring back all the supply, the facilities, the refineries, and the infrastructure."
"The Iran conflict has flipped the airline industry on its head, as fuel costs have more than doubled at a time when demand has improved," Melius analyst Conor Cunningham told clients.
Relief in airline stocks was evident in premarket trading in New York, with United Airlines up 11.5%, Delta Air Lines up 11%, and Southwest Airlines up 10%.
In mid-March, amid all the panic, UBS analyst Atul Maheswari asked: "Are we approaching a bottom for these airline stocks?" It appears so (well so far).