Airline profits expected to fall
There were a few interesting news stories today relating to airlines. It seems that analysts are expecting airline profits to take a sizeable dent because of the oil price which has vacillated between $50 and $85 a barrel over the last year.
IAG, which owns British Airways, is expected to take the biggest hit, with Lufthansa and Air France KLM also expected to suffer.
Airlines are also likely to be making big compensation claims to Boeing after having to ground all Max 737s since March 13th – but there’s more news coming out now that Boeing failed to advise airlines about shutting off the warning systems, according to findings from the US investigators.
I suspect that Boeing will be facing a LOT of compensation claims and they will try their best to avoid paying cash compensation by offering alternatives like discounts on orders or the ability to defer, but when you’ve got airlines already suffering with increased costs and the prospect of a global economic slowdown – and then this latest thing about not telling the airlines or the FAA the right procedures – you can imagine that there is going to be huge pressure on Boeing.
The meat industry
The other thing I wanted to alert you to today was the other side of the massive pig cull going on at the moment in China following the spread of African swine fever.
China is the home to half of the world’s pigs, but a massive cull of 20% of the pig population has led to a 40% price rise in hog carcasses in the last two months alone.
Companies like Tyson Foods and Smithfield foods have been accelerating production destined for China and even poultry processors like Pilgrim’s Pride have been benefiting from consumers buying more chicken to compensate for the lack of pork.
One interesting thing here is that, traditionally, China has always bought pig feet, hearts and heads but now it is buying whole carcasses that could affect the supply of bacon and sausages both domestically and elsewhere.
As things stand at the moment, pork prices at restaurants and supermarkets haven’t gone up too much but if the situation persists, this will change.