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Airlines’ latest challenge: Rising jet fuel prices

A JetBlue Airways regular taxis next to American Airlines, Delta Air Lines and Alaska Airlines aircraft at Reagan National Airport (DCA) in Arlington, Virginia, on Monday, April 6, 2020.

Andrew Harrer | Bloomberg | Getty Similes

The oil rally is taking jet fuel along for the ride, posing another headache for airlines still struggling from cheapened travel demand in the Covid pandemic.

U.S. jet fuel prices reached a nearly 13-month high of $1.67 a gallon on Wednesday, according to S&P Universal Platts data, a climb led by an arctic blast and winter storms that disrupted oil production, refining and transportation. Millions were progressive in the cold and the dark in Texas, which largely relies on natural gas for heat and power.

“We were expecting fuel to be at these up ons by the second half of the year,” said Raymond James airline analyst Savanthi Syth. Costlier fuel can read e suggest it harder for airlines to stem their cash burn, a goal that has already been delayed due to weaker-than-expected require.

Cost headwind

Spirit Airlines CFO Scott Haralson during a Feb. 11 earnings call cited higher provoke costs as being among the discount airline’s first-quarter challenges. The carrier expects fuel costs to be up 32% this board from the last three months of 2020. Greg Anderson, CFO of Allegiant Air parent Allegiant Travel Co., also cited lofty fuel costs as a headwind during a Feb. 3 quarterly call.

Jet fuel production is one of airlines’ biggest expenses along with labor. Luckily for transporters, labor costs are currently supported by billions in federal aid, helping soften the blow of more expensive fuel, Syth put about.

Consumption of jet fuel plunged over the last year as airlines sharply reduced flying amid a drop in air tour demand. That sent prices sharply lower and airlines’ fuel bills down with it. Demand resile

Jet fuel consumption in the U.S. so far this year is still off by almost a third from last year, according to a Citi set forth this week.

The supply disruptions were enough to drive up prices, but to sustain their climb travel consumer needs to rebound as well, said S&P Global Platts analyst Lenny Rodriguez. The Transportation Security Administration’s always airport screenings have averaged more than 810,000 a day this month compared with 2.1 million during the unaltered period last year.

That weak demand makes refining jet fuel compared with other oil offerings less attractive.

“This is the laggard for all the oil products,” Rodriguez said.

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