Why an aviation boom could give the Rolls-Royce share price a boost

The Rolls-Royce share price has continued its 2022 fall, even though airlines are upbeat. Surely an aviation sector recovery would give Rolls a boost?

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What does the Rolls-Royce (LSE: RR) share price need to give it a boost? That’s what I keep asking every time I think of buying. One thing that would surely help is a recovery in the aviation business.

Get those seats filled, get everyone flying off to exotic destinations again, and surely things will start turning round at Rolls-Royce?

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Queues for passport applications in the UK are growing, as pent-up demand for jetting away is being released. All those who were restricted to the UK’s shores during the pandemic are now seeking their escapes.

Current Passport Office advice is to allow up to 10 weeks for them to arrive, such is the demand. And I’ve read stories in the mainstream news of people having to wait even longer.

What effect is this renewed demand having on the airlines themselves? If it doesn’t feed through to significant capacity increases for them, there will surely be little for Rolls-Royce to gain.

Flyer numbers rising

International Consolidated Airlines this month told us that first-quarter passenger capacity had returned to 65% of 2019 levels. That’s only a modest improvement over the 58% achieved in the final quarter of last year.

But the Omicron virus had a short-term negative effect. And the period only covers January to March, not close to the main flying season yet. Interestingly, IAG reckons there has been no noticeable impact from the war in Ukraine. Q2 figures should tell us a lot more in July.

For its part, easyJet remains upbeat about its outlook. In a first-half update, the budget airline said its plans to reach near-2019 capacity by the summer remain unchanged.

Escalating costs

Hopes that the the Rolls-Royce share price will climb on the back of an airlines recovery face one big challenge. I’m thinking of soaring energy prices, which must hit airlines on two fronts.

Firstly, there’s the direct effect of rising aviation fuel prices. That’s one of the biggest factors affecting costs, and it is completely beyond control.

That, alone, is why I have never bought shares in an airline. I don’t like businesses that are at the mercy of major uncontrollable external forces. Throughout the pandemic, I have been thankful for that, as we’ve seen a far bigger uncontrollable force than I ever imagined.

The other issue is the impact on customers, as inflation continues to escalate. More families prioritising paying their domestic bills means fewer with the cash to spare for luxuries like holidays.

Rolls-Royce share price

How will these concerns, pushing and pulling the airline business from different directions, affect the Rolls-Royce share price?

I’m sure inflation will ease and we’ll get back to long-term trends. And I remain convinced that the travel sector will recover, at least close to pre-pandemic levels. But when?

That is still far from clear. For that reason, I will continue to hold off from adding Rolls-Royce shares to my portfolio, and keep observing. And I will be watching and hoping for an airline sector recovery.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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