Daily Insight – Wednesday January 30, 2019 – 2019 looks tougher

News

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.