Self-inflicted injuries and Brexit uncertainty out the way, it was expected to provide a reasonably upbeat assessment of prospects on Wednesday alongside its trading update.
However, America’s drone assassination of Iran’s military leader Qassem Soleimani has put paid to that with oil prices soaring in its wake, hiking the cost of jet fuel.
The FTSE 100-listed group was just enjoying some respite with upgrades to ‘buy’ from ‘hold’ by both HSBC and Citi Group last month.
Fuel prices mean a lot
In the case of airlines, oil price is pivotal as fuel costs account for most of their operating expenses: from 36% for Ryanair to 25% for IAG.
According to Wahab, profit margins will be squeezed as the companies will be forced to purchase the fuel at a higher cost, having to boost ticket prices.
Consumer confidence may be further shaken by the tensions in the Middle East areas, which, if sustained in the long term, may hit lucrative markets such as Egypt.
As some analysts say travel to the Middle East may be less enticing in the medium term, it seems an unfortunate day for Wizz Air to have announced an agreement with Abu Dhabi’s state-owned development agency to establish operations in the emirate.
“Airlines are volatile stocks and if people decide they do not want to take any risks, airlines are the first to be sold,” Russ Mould, investment director at AJ Bell, told Proactive.
Unless tensions de-escalate, IAG and the likes are set to remain under pressure, he added.