05-08-2018, 02:09 AM
Interesting stuff
And with oil now creeping towards $70 per barrel, its rising price may actually be good news for the airlines this time around, Morgan Stanley says. "There has been a level of debate amongst investors around the implications of higher oil on Airline shares, and in our opinion, higher is a good thing," analyst Rajeev Lalwani told clients last week. "This is because it instills: 1) Pricing and capacity discipline; 2) Financial constraints on costs and capex; and 3) Margin and multiple expansion." For every $10 per barrel increase, airline margins can contract 1-2 percentage points, the bank estimates. Because fares tend to move in step with fuel prices, airlines will have reason to raise fares again and "recapture the 5-10 points of lost pricing from recent years."