Auriga on Metals & Specialty Materials: IATA Negative Airline Profit Revision Driven by Higher Fuel Costs, Not Demand Concerns
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
11 Buy, 5 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Auriga on Metals & Specialty Materials: IATA Negative Airline Profit Revision Driven by Higher Fuel Costs, Not Demand Concerns
The International Air Transport Association reduced its forecast for airline net profits in 2012 by $0.5b to $3.0b. Importantly, this was driven by a higher oil price assumption ($115/b brent versus $99 previously) and not increased demand concerns. It was also noted that the "damage to profitability has been limited by a boost to revenues from improving business and consumer confidence and higher load factors." The IATA also indicted that improved confidence has been generated by Eurozone concerns diminishing and an improvement in the US economy. While we are encouraged to hear the Association's more constructive commentary on revenue trends, we also note this added pressure from higher fuel costs should serve as incremental incentive for the airline industry to accelerate the replacement of the aging fleet with more fuel efficient aircraft. This would be beneficial to the specialty metals industry, including names such as Carpenter Technology (NYSE: CRS), Haynes International (Nasdaq: HAYN), Allegheny Technologies (NYSE: ATI), Universal Stainless & Alloy (Nasdaq: USAP) and Castle (NYSE: CAS). As reminder, many of the specialty metals produced or distributed by these companies further enable the production of lighter weight airframes and more fuel efficient engines…
The International Air Transport Association reduced its forecast for airline net profits in 2012 by $0.5b to $3.0b. Importantly, this was driven by a higher oil price assumption ($115/b brent versus $99 previously) and not increased demand concerns. It was also noted that the "damage to profitability has been limited by a boost to revenues from improving business and consumer confidence and higher load factors." The IATA also indicted that improved confidence has been generated by Eurozone concerns diminishing and an improvement in the US economy. While we are encouraged to hear the Association's more constructive commentary on revenue trends, we also note this added pressure from higher fuel costs should serve as incremental incentive for the airline industry to accelerate the replacement of the aging fleet with more fuel efficient aircraft. This would be beneficial to the specialty metals industry, including names such as Carpenter Technology (NYSE: CRS), Haynes International (Nasdaq: HAYN), Allegheny Technologies (NYSE: ATI), Universal Stainless & Alloy (Nasdaq: USAP) and Castle (NYSE: CAS). As reminder, many of the specialty metals produced or distributed by these companies further enable the production of lighter weight airframes and more fuel efficient engines…
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