Brent Crude prices jumped a few weeks ago when ISIS insurgents attacked Iraq from Syria, then prices stabilized at around the $110 level before moving up again last week to over $115 before falling back to currently sit at just under $115.
WTI Cushing has tracked this trend, and is sitting at just over $107 a barrel at the moment. So it seems we have, for the moment at least, a new norm for prices.
Chinese manufacturing output figures and Western economic figures all point towards growth, which would put upward pressure on oil prices in any event. Because this is all coming as the summer holiday schedules begin to kick-in, it is particularly poor luck for many airlines caught without sufficient fuel hedging programs in place.
As a result airline and travel firm shares have been hammered once again this morning and we wait to see what will happen to US airline shares at the open later today. It was interesting that initially Delta shares fell with all other airlines, but should they have given that the airline has many weapons in place to deal with such oil spikes including of course its own refinery? Maybe there is significant long-term value in Delta right now.
But the good news comes from the Indian airline market as it was announced late last week that rail fares across India will increase by an average of 14.5% this year, with further increases following this as the government tries to balance the books.
This brings the price of rail travel very close indeed to that of air travel on many routes right now; and with the added marketing coming from AirAsia and other airlines in response, the timing could not be better for this rail fare announcement.
Can the Indian airlines gain another large group of regular travellers from the rail network? The chances are higher now than they have been for some time. There remain worries about government-sponsored market manipulation via Air India and the fight for survival for the likes of Jet, SpiceJet and GoAir, but for this week at least there is potential for increased customers across the board. Improved growth at IndiGo looks likely.