An important component of measuring profit margins is understanding price risk and the relationship between revenue and cost, that is, the price of tickets and the price of jet fuel. In collaboration with S&P Global Commodity Insights, the leading independent provider of benchmarks for the commodities and energy markets, we have created new indices that measure profitability in the aviation industry for the first time. Combining Platts benchmark jet fuel price ($/ton) with the Skytra Price Indices measuring airline yields ($/RPK), this new and unique index family provides an unrivalled level of insight into the air travel industry’s profitability.

Sharing risk

The airline and lessor relationship can be protected using floating lease rates based on the airfare to jet fuel price spread index. By linking the regional and airline level index family to lease agreements it creates a new mechanism where both parties share the risks and benefits of the current economic market: if the index moves above or below pre-agreed thresholds, the lease rate changes accordingly.

Speculation

Investment banks, hedge funds, analysts and speculative traders can use the airfare to jet fuel price spread index family to gain deep insights into the profitability of the industry at a regional and airline level. With increased transparency and enhanced innovation, these new insights will enable all participants of the financial aviation sector to take more informed decisions.

In the above example the airfare-to-jet-fuel price spread indices show that flying internally within Europe and North America has been less profitable post-pandemic when compared to pre-pandemic levels.

In Europe, the pre-pandemic (2013-2019) average was $5000 in profits per ton of fuel burnt compared to just $3000 in February 2022. This drop of 40% represents a historic low and demonstrates how heavily affected margins have become since the pandemic. This situation is mirrored in North America where profitability fell from an average of $3500 pre-pandemic, to $1750 in February 2022, which is a 50% decrease as of Feb 2022.

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     The pandemic has proved that the aviation sector needs new tools to rebuild its strength. By joining forces with S&P Global Commodity Insights, we aim to do just that, by offering the aviation sector a new, transformative way to foresee risk and navigate any future potential crises.

Matthew Tringham

Co-Founder Skytra

‘‘

     Our combined data should better enable the aviation sector to traverse uncertainty and growth opportunities with greater efficiencies.

David Martinez

Head of Product Management, Market Reporting & Trading Solutions at S&P Global Commodity Insights

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Phone: +44 (0) 20 8059 7700


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SKYTRA Limited is a regulated benchmark administrator under the UK Financial Conduct Authority (FCA), with FRN 923418. Skytra Limited is a wholly-owned subsidiary of Airbus SE, and is a company incorporated in England and Wales under registered number 11984828. VAT number: 335130145 and LEI 254900Y389SLBTPDX711. The content on this website is for information purposes only. None of the information concerning the services or products described constitutes advice or a recommendation of any product or service. To the extent that the information provided constitutes a financial promotion as defined by section 21 of the Financial Services and Markets Act 2000, it is only directed at persons who qualify as Professional clients as classified by MiFID II. Calls and electronic communications may be recorded for monitoring, regulatory and training purposes.
Skytra is an Airbus company facilitating financial risk transfer for the air travel industry

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