A sizable increase in cargo revenue helped U.S. airlines curb the impact of higher fuel prices in the first half of 2018, an industry lobbying group said Wednesday.
Jet fuel prices in August topped $90 a barrel, a nearly 38 percent climb from the prior year, according to the International Air Transport Association. Driving that increase, among other things, was President Trump’s decision to withdraw the U.S. from the Iran nuclear accord and reimpose sanctions.
As a result, fuel expenses at U.S. carriers rose 31 percent in the six months through June, compared with a year earlier, according to Airlines for America, which represents domestic companies including United Airlines, Southwest Airlines and JetBlue. While that drove operating costs higher, it was softened by an 18 percent increase in freight revenue, partly due to increased e-commerce shipments for wealthier U.S. consumers.
“It’s just a very hot environment for air cargo,” John Heimlich, the group’s vice president and chief economist, told reporters. “It certainly helps in an otherwise challenging financial period.”
Consumers “are getting last minute-type shipments just in time, which gets a favorable bias toward air over surface movement,” he said. “Shippers are scrambling for space on any aircraft they can get.”
Still, U.S. carriers — some of which have slashed profit targets for the year because of fuel costs — say they plan to reduce flights in 2018 and into 2019. China is one destination to which airlines are scaling back services, according to Heimlich. Carriers are also delaying deliveries of new aircraft from planemakers, reducing other capital expenditures and laying off workers.
“Everyone is looking at the marketplace differently and taking a different approach,” Heimlich said.
