Rouble Drops and Oil Gains as Airline Prospects Falter

March 02, 2022 10:11

Yesterday, the Russian rouble continued its downward trajectory, falling more than 6.6% against the US dollar and, this morning, has continued to slide, having fallen by a further 5.6% at the time of writing.

In just three days, the rouble has dropped almost 30% against the greenback.

Meanwhile, as the rouble falls, oil moves relentlessly in the other direction. Brent crude, which spent several days hovering around the $100 a barrel mark, yesterday shot up 9.5% and, this morning, has soared above $110 a barrel.

In the stock market, Wall Street closed resoundingly lower yesterday, as uncertainty continues to make its presence felt. The S&P 500 and the Nasdaq Composite both closed around 1.6% lower, and the Dow Jones dropped almost 1.8%.

Amongst the many industries recording losses in the equities market yesterday, airlines were hit worse than the average.

We have already covered one of the factors weighing on the airline industry at the moment, oil prices. With oil currently at an eight year high, higher fuel prices for airlines are likely to eat into earnings for the foreseeable future.

Also weighing on the industry is the current geopolitical situation. Last night, the US announced that it would close its airspace to Russian flights, following in the footsteps of the UK, Canada and the European Union. For every nation that has closed their airspace to Russian flights, the Kremlin has responded by closing that nations flights from Russian airspace.

These moves have resulted in some airlines being forced to consider longer, more circuitous routes to operate the same services. United Airlines, for example, cancelled two India-bound flights this week as it evaluates how it can continue to service this destination without crossing Russian airspace.

All this comes at a time when the airline industry had started to show signs of recovery after enduring a difficult two years at the hands of the pandemic. Recent increases in passenger numbers had caused many to feel fairly optimistic about the coming summer months in the northern hemisphere. However, whilst conflict continues in eastern Europe and oil prices remain at such high levels, it is difficult to find a positive case for the airline industry in general.

Yesterday, United Airlines, Delta and American Airlines all fell by more than 5.5% whilst, in the UK, International Consolidated Airlines (IAG) and easyJet both fell by 8.4% and 9.4% respectively, although IAG has clawed back some of these losses this morning.

Depicted: Admirals MetaTrader 5 – United Airlines Daily Chart. Date Range: 21 October 2020 – 1 March 2022. Date Captured: 2 March 2022. Past performance is not a reliable indicator of future results.

Depicted: Admirals MetaTrader 5 – United Airlines Weekly Chart. Date Range: 16 August 2015 – 1 March 2022. Date Captured: 2 March 2022. Past performance is not a reliable indicator of future results.


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Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s