Sustainable Fuel Forward

The U.S. and Europe Take Different Tracks on Greener Fuel

Pushing Back: Inside the Issue

Airlines from Thailand, South Korea, and Turkey headlined the earnings parade last week, offering mixed messages on the recovery. Travelers are clearly returning to the beaches and cities of Thailand, though not yet in sufficient quantity to deliver profits for airlines like Thai Airways, Bangkok Airways, and Thai AirAsia. The Istanbul-based low-cost carrier Pegasus fared better, but not as well as its larger rival Turkish Airlines. In Seoul, Asiana joined its prospective merger partner Korean Air in reporting solid second quarter operating profits. But Asiana’s net result was negative, tarnished by a scourge challenging many airlines right now: the strong U.S. dollar.

Mercifully for airlines, fuel prices continue to drop from their extreme highs earlier this summer. In late April, the cost of U.S. Gulf Coast jet fuel briefly soared above $5 per gallon. Now it’s priced in the low $3 range. Cheaper energy, of course, could help lift many economies, adding further momentum to the travel rebound.

What else could stall the rebound? Aside from seasonal factors (autumn is fast approaching in the northern hemisphere) eyes are on supply chain factors, including the ability of Airbus and Boeing to deliver enough aircraft to meet rising demand. Staffing is another potential constraint. And then there’s the giant question of China, a market that produced 74 million passenger journeys in 2019, but below 2 million last year. Does China, an enormous force in global air travel, ever reassume the role it once played? Much of the aviation sector's fortunes depend on it.

Policymakers in the U.S. hope sustainable aviation fuels play a role in addressing the climate crisis. A company called Boom hopes to reassert the role of supersonic planes in global aviation — American, for one, is on board. In Europe, IAG is bringing Air Europa on board with an ownership stake, amplifying its strength across the South Atlantic.

In other news, SAS has the funding it needs to proceed with its bankruptcy restructuring. Malaysia Airlines ordered new widebodies. United is shopping for new widebodies. And Condor opted for new narrowbodies. The latter joins an enthusiastic lot of Airbus A321neo buyers, one that includes India’s IndiGo, which has more airplanes on order overall than any other airline.

Prepare for more earnings this week, plus an investor event in which major U.S. airlines will provide an update on the latest trends.

Airline Weekly Lounge Podcast

The Lufthansa Group has spent the better part of 20 years trying to improve its fortunes through consolidation. Some deals, like of Swiss, have been winners, others, like of Austrian and Brussels, not so much. Edward Russell and Jay Shabat discuss Lufthansa's aim, and what a potential ITA Airways deal could mean for the group. Also, what's in the Inflation Reduction Act for airlines. Listen to this week’s episode to find out. A full archive of the 'Lounge is here.