In a new research report, Kroll Bond Rating Agency (KBRA) has provided an overview of the challenges facing the global airline sector.
The global airline industry experienced good growth over the past year and is expected to maintain positive momentum in 2019, says the report that also highlights the heightened structural and macroeconomic challenges and uncertainties, which are expected to negatively impact fundamentals over the intermediate to long term.
The report suggested that despite economic and political headwinds in many geographic locations around the world, passenger demand fundamentals in 2019 will continue to benefit from positive momentum, supported by incremental growth in global GDP and favourable capacity trends.
Less volatile and lower fuel prices have led to profit margins becoming largely stabilised, following sizable increases in jet fuel prices during the first half of 2018. Positive operating fundamentals since the trough have also complemented airlines’ improved financial flexibility.
Airlines across all regions have been proactive in opportunistically refinancing debt to take advantage of the low interest rate environment over the past few years, which will help insulate coverage metrics from any uptick in interest rates.