Two leading sources of airline analysis are predicting that 2019 is going to be a tough year. IBA.aero has this insight. And Ishka has this insight. As Ishka’s Eddy Pieniazek succinctly notes, “Nearly 20% of the airlines tracked by Ishka are entering 2019 with a negative outlook on their financials”. IBA offers this statement: “Whilst raising interest rates will indicate an improving economy and should improve lease yield, a strengthening dollar will hinder airline profitability and bankruptcies will follow”.
Analysis
In 2018 we saw several big airlines go under; well known brands like airBerlin and Monarch. But also startups like Primera. Low cost carriers have the thinnest margins and are least able to withstand shocks – especially from an oil price spike. But LCCs like Ryanair
, with strong balance sheets have the resources to buy hedges. They also have the bank accounts to withstand shocks.
Insight
If we are going to see more airline collapses this year, what might the impact be? It depends on where these collapses take place. Airlines like Alitalia, SAA and Air India might continue to benefit from state largesse and patience. But other airlines may not have such a deep pocket owner. Asia is especially rich in startups that may be vulnerable to another oil spike.
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