Is the airline industry soon to welcome a historical change? Last week, Airbus SE, a European multinational aerospace corporation which is involved in designing, manufacturing and selling civil and military aerospace products as well as aircraft all over the world, announced a new leap in progression whereby it demonstrated its first flight on sustainable aviation fuel (SAF) made up of mainly used cooking oil.
The company aims to achieve zero emission (currently 50% SAF-kerosene blend) by 2035. Besides being environmentally friendly, decarbonization also means there will be less reliance on petroleum-based fuels. Undoubtedly, as regular jets run on carbon fuels, fluctuations in the oil price directly affect airline companies. The Oil price soaring recently following increased demand and the Russian-Ukraine conflict has negatively impacted these companies, which have been forced to increase ticket fares to offset operational costs. According to economist Adit Damodaran, “a 10% rise in jet fuel cost would be associated with a 3% increase in operating expenses for the airline”. Therefore, realization of decarbonization would effectively keep fares steadier regardless of changes in oil price.
In addition, the Emirates Airbus A380 successfully tested breaking the speed record. “Flying faster than the speed of sound”, once achieved, could directly increase Airbus’ competitiveness among its peers. Transcontinental return journeys within a day, ultra-rapid transport of high added-value goods and strategic reconnaissance would be achieved easily.
Technical Analysis:
#Airbus is currently traded in consolidation within a higher range. It remains supported above the 100-SMA. To date, the company share price has pared more than 60% of losses suffered since its plunge in February 2020. Recent resistance to watch is €120, followed by €128 and the high point seen in 2020 at €139.38. On the other hand, nearest support is €104, followed by the moving average support at €93. Breaking below the said level shall extend bearish opportunity towards €82.
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Larince Zhang
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