Oil on the rise again as upgrades and ADs put a strain on margins

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By TESTCustomwebLP TESTCustomwebLP April 19, 2013 12:44

Oil on the rise again as upgrades and ADs put a strain on margins

It is a busy time and right now the main things worrying most are the cost of recent ADs with compliance dates in May and the cost of avionics upgrades, FX risks have subsided somewhat but now it would be wise to add oil to the worry list as it is rising slowly again.

Now all this should cause concern for any airline that is currently posting losses, as the going is only going to get tougher as we move through 2013. Additionally it should cause concern for lessors who have to ensure that aircraft are being upgraded and retrofitted. The recent FAA AD regarding Airbus landing gear (see below) is another costly example of 2013 drain on finances that we have to look forward to and that will act to depress profits.

So 2013 and 2014 will be years of increase maintenance costs for all but oil is as always the big worry and it now stands at $99 a barrel. Now the oil price effects are felt most in India and across much of Africa. In Africa airlines are set to bring in $100m of operating profit this year but much of this is being dissolved by high fuel costs. Aviation fuel is 21% more expensive in Africa than the world average and accounts for around 44% of costs. The governments of Uganda, Angola and Ghana are making changes to assist aviation but other governments need to do more.

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By TESTCustomwebLP TESTCustomwebLP April 19, 2013 12:44
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