Oil might just fly
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Air travel data bodes well for oil demand, lifting COVID-19 gloom
Relative to gasoline demand, flat jet fuel demand has been a drag on oil price improvements from COVID-19 induced lows, but it may now be lifting off.
Analysts have attributed a sharp oil price rebound to lowered inventories and a looming hurricane, but the aviation situation may be adding to the optimism.
West Texas Intermediate crude prices leapt back into the $40s at Petroleum News press time Sept. 16, up $1.83 to $40.11, while Brent gained $1.67 to $42.20. Alaska North Slope jumped 97 cents to $39.43 on Sept. 15 but rose to $41.11 on the 16th.
Airline stock prices gained altitude on Monday, Tuesday and Wednesday following bullish travel demand reports for the week ended Sept. 13 from the Transportation Security Administration.
The TSA said that an average of 738,038 people went through its security checkpoints each day, rising above the 715,145 daily average of the previous week - which included Labor Day weekend travel.
The post-holiday jump may indicate an uptick in business travel demand.
Leisure travel is higher as well. TSA data said 3.36 million people flew on Labor Day weekend, versus 2.68 million on the July 4th weekend and 1.21 million over Memorial Day weekend.
A recent Cowen survey said “pent up demand” for air travel may drive traveler numbers higher into year end, with 52% expecting to fly by the end of the year versus 34% flying during the pandemic.
Chinese domestic air travel has staged an impressive comeback.
An August report by travel analytics company ForwardKeys said that the Chinese domestic air travel market could recover in September.
Chinese carriers have discounted seats heavily, some offering all-you-can-fly unlimited passes to coax travelers into the air.
China domestic flying bottomed out in February, when the pandemic forced some Chinese cities and provinces into lockdown, but it has consistently increased since then.
Chinese carriers seem to be focused on getting planes into the air, rather than restricting seat capacity as U.S. carriers have done.
Cirium analytic data indicate that domestic passenger capacity is expected to be about 10% higher by the end of September than the same period last year.
Cirium fleet storage data for China’s largest carriers - Air China, China Southern Airlines and China Eastern Airlines - shows that the number of stored aircraft has fallen sharply in recent months.
Domestic freight sees growthU.S. air freight carrier volume is flying higher on e-commerce growth.
FedEx reported that average daily package volume for FedEx Ground rose 31% to 11.6 million during the fiscal first quarter ended Aug. 31, while revenue per package rose 2% to $9.33. FedEx stock price moved higher on the news.
COVID-19 initially created turbulence for FedEx and United Parcel Service as profitable deliveries to businesses evaporated while higher-cost residential deliveries soared.
Those costs have been offset however by lower fuel prices. FedEx’s $565 million fuel spend across the company during the quarter was 35% lower year over year, while infrastructure such as automated sorting centers and route optimization have added cost efficiency.
Amazon’s Prime Air has built up its air cargo fleet during the pandemic, to about 70 planes, up from 50 planes in February, according to a Sept. 9 report by DePaul University Chaddick Institute for Metropolitan Development.
Prime Air expanded flight activity 30% since April through fleet expansion and improved utilization, the report said.