The unrest in Syria has the potential to drive up jet fuel prices, but any increase isn’t likely to hurt airlines right away, according to Helane Becker of Cowen and Co.
“Despite a surge in jet fuel prices, the airlines are expected to be significantly profitable in the near term,” she wrote in an email to members.
She noted results, on average, for domestic carriers in July were better than expected and that August has bee predicted to be a banner month as well.
However, these robust numbers are being driven largely by passenger demand, which should fall off a bit as summer fades. Becker warned if fuel prices continue to rise much more, carriers might look to cut passenger capacity and raise pricing.
“The airlines are also modestly growing capacity in 2H13,” she wrote. “We believe the airlines could cut capacity in 2H13, if jet fuel continues to trade higher.”
Fuel is not the only issue for airlines, however. In a summation of Cowen and Co.’s speech at the International Association of Airline Internal Auditors
conference, Becker said threats to the health of domestic carriers will also continue to come from Middle Eastern airlines. In addition to Emirates Air Line and Etihad Airways having close to 500 planes on order, current Open Sky agreements allow these carriers to fly into the United States, taking market share from domestic carriers, she noted.
“The U.S. airlines need a national airline policy that will help to fend off threats from foreign airlines,” she wrote. - Jon Ross