Yahoo Finance UK travel sector recovery up in the air as staff shortages and higher fuel prices bite
Britain's travel sector recovery is up in the air as staff shortages due to rising COVID cases and higher fuel prices dent hopes and airlines' earnings just as passengers return to the skies.
It comes as Ryanair (RYA.IR) warned it expects to post a loss of at least £300m ($394m) for the full year later in May as it stages a cautious recovery from the pandemic.
The Dublin-based firm forecast a net loss of between €350m ($293m, £294m) and €400m for the year to the end of March, less than previous guidance of between €250m and €450m.
Europe's biggest budget airline said passenger numbers "recovered strongly" but were still more than a third below pre-COVID levels. Traveller numbers increased to more than 97 million over the last year, up from 27.2 million in the year to March 2021. Continued COVID measures in some regions mean numbers are still significantly below pre-pandemic levels of 149 million.
Ryanair said it increased its hedging to cover 80% of its fuel, amid significant volatility in oil prices sparked by Russia's invasion of Ukraine.
Shares in Ryanair were down 2.6% in pre-market trading in New York.
Read more: EasyJet and BA cancel hundreds of flights as COVID cases surge
Meanwhile, a string of flight cancellations due to COVID staff sickness left Easter holidaymakers stranded as the sector was hit by additional delays at Dover and in the Eurotunnel.
Over 300 flights were cancelled by the carriers as COVID cases hit a record high since the onset of the pandemic, with some 4.9 million people in England estimated to have had contracted the virus in the week ending 26 March.
Several airlines, including both British Airways and easyJet (EZJ.L), have recently dropped their requirements to wear face masks on flights.
Shares in easyJet fell 2% in mid-morning trade on Monday, while those in BA-owner International Consolidated Group (IAG.L) fell 1% during the session in London.
Industry experts have warned that the soaring price of fuel "could weigh" on corporate earnings in the airline industry unless extra costs are passed on to the customer.
Russ Mould, investment director at AJ Bell, said: "The broader aviation sector has been waiting for the magic moment where flying restrictions were lifted, and individuals regained their confidence to get on a plane again.
"With both forces now in motion one would have thought businesses that enable and support the flying experience would be making hay while the sun shines. Unfortunately, the sector’s recovery is as chaotic as someone on their first flying lesson.
"If the current disruption continues into the Easter weekend, we could easily see airlines like easyJet have to downgrade their earnings forecasts.
"Making matters worse is the fact that oil prices remain stubbornly high which is putting pressure on fuel costs. Ryanair is clearly concerned about the situation given how it has announced increased fuel hedging."
The surge in fuel prices and the delays have also sparked fears that carriers will hike prices to offset costs.
Fuel prices can make up as much as a third of an airline’s costs. Global jet fuel has risen by a third to more than $150 (£114.40) per barrel since the war in Ukraine plunged commodity markets into turmoil.
Brent crude (BZ=F) rose 1% to $105.40 a barrel on Monday, while US light crude (CL=F) was also 1% higher to $100.28 in electronic trading on the New York Mercantile Exchange at the time of writing.
