MARKET REPORT: Airlines lose altitude as fuel costs rise

Airlines lost altitude as the current strength in oil prices raised the prospect of higher fuel costs once again.

EasyJet suffered a big drop on the FTSE 100, falling 3.1 per cent, or 17p, to 540.4p, and British Airways owner IAG, one of the biggest gainers in 2024, lost 1 .2 per cent, or 3.7p, to 298.9p.

Russ Mould, an analyst at AJ Bell, noted that airlines had enjoyed easing cost pressures in 2024 as oil prices retreated on hopes for global economic growth. However, with oil rising again in early 2025, he said fuel costs could once again be a significant headwind for the industry.

FTSE 250-listed Wizz Air fell even after reporting a rise in December traffic figures. Budapest-based Wizz saw its passenger numbers rise 2 percent to 5.06 million last month, up from 4.96 million a year earlier, and its load factor – a measure of how full passengers are airplanes – increased to 86.5 percent. Wizz fell 1.8 per cent, or 26p, to 1,390p.

Irish discount airline Ryanair also reported traffic figures for December, which showed it carried 13.6 million passengers, up 8.4 percent from 12.5 million a year earlier.

But airlines’ December load factor of 92 percent was slightly lower than some analysts’ forecasts, and Ryanair’s Dublin-listed shares lost 2.1 percent.

After a positive start to 2025, London benchmark indices soon saw the mood change.

The FTSE 100 index fell 0.4 per cent, or 36.11 points, to 8,223.98 and the FTSE 250 index finished down 0.2 per cent, or 48.83 points, at 20,591.4.

Diageo was one of the big losers, falling 3.9 per cent, or 99 pence, to 2,448.5 pence after the US Surgeon General called for alcohol labels to include cancer warnings.

The owner of Guinness and Johnnie Walker also suffered when the notice suggested recommended limits on alcohol consumption could be re-evaluated.

Pharmaceutical giant GSK was also weak, falling 1.6 per cent, or 21.5 pence, to 1,340 pence, even as it reported that its Nucala treatment has been approved in China to treat those suffering from an eye condition. long-term sinuses after a phase 3 study. And miners retreated after recent gains, with Anglo American falling 1.5 percent, or 35 pence, to 2,346.5p, with Rio Tinto falling 1.4 per cent, or 66p, to 4,698p.

But the oil majors rose, with Shell ahead 1.6 per cent, or 39.5 pence, to 2,566.5 pence, and BP up 1.2 per cent, or 4.8 pence, to 407.95 pennies. On the FTSE 250, Harbor Energy gained 2.8 per cent, or 7.3 pence, to 268 pence, and Ithaca Energy added 3.6 per cent, or 4.2 pence, to 122.2 pence.

Meanwhile, Tullow Oil – which was buzzing before Christmas about Kosmos Energy’s bid talks (down 3.6 per cent, or 11p, to 298p), despite them ending quickly – jumped 8.1 per cent, or 1.76 pence, to 23.62 pence, boosted by a positive tax verdict.

The International Chamber of Commerce has decided that the Branch Profit Remittance Tax (BPRT) is not applicable to Tullow Ghana as it falls outside the tax regime provided for in its oil agreements.

As a result, Tullow Ghana is not required to pay the £258 million BPRT assessment issued by the Ghana Revenue Authority and will have no future exposure to BPRT in respect of its operations under the arrangements.