US airlines maintain 2018 capacity growth targets as oil prices climb steadily
The four largest US airlines continue to brace for higher fuel costs in 2018, but, for now, some of those operators have no plans to curtail higher capacity growth for the year. American and Delta are both planning to expand supply in 2018, and projected schedules show United’s capacity is also growing in 1H2018.
American, Delta, Southwest and United take somewhat different approaches to managing their fuel costs. Years ago, US Airways swore off fuel hedging, and its management carried that practice to American after the two airlines merged in late 2013.
Now, Delta and Southwest are touting the burning off of hedge losses during 2018. Delta had also attempted to inject some control into the fuel supply chain with its 2012 purchase of its Trainer refinery. Its ownership of the refinery has had mixed success, but at the moment its unorthodox purchase is providing some benefit as fuel costs continue to rise.
Overall, conditions are different from when fuel spiked above USD100 per barrel a decade ago. The US economy is stronger, and the country’s airlines have overhauled their businesses to produce a consistent cycle of profitability.
However, capacity expansion against the backdrop of climbing fuel prices could pressure US airline valuations.
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