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What Price Oil?  
User currently offlineScotron11 From United Kingdom, joined Feb 2004, 1178 posts, RR: 3
Posted (9 years 11 months 3 weeks 3 days 15 hours ago) and read 2338 times:

With oil breaching the $50/barrel mark and more than likely to hit $51 soon, at what point do LCC's start to implement some sort of "fuel surcharge"? I know the majors have tried to implement some sort of surcharge but have backed off because no-one followed suit.

Here and in Asia a few airlines have implemented a fuel surcharge but I cannot remember any US carrier sticking with it. Also, are "state-owned" airlines "immune" to the price of oil and hence jet-fuel because their governments pick up the tab?

I am aware that there is a lot of hedging by airlines, but I would think the longer oil is way over $45/barrel it has to start hurting everyone at some point, especially carriers like US & UA which do not have the funds to do any hedging.

57 replies: All unread, showing first 25:
 
User currently offlineHz747300 From Hong Kong, joined Mar 2004, 1675 posts, RR: 1
Reply 1, posted (9 years 11 months 3 weeks 3 days 14 hours ago) and read 2308 times:
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I think that depends on how well they hedged the price of oil. If they used futures to contain the cost of oil, they should in turn pass that savings on to the consumer, which in most cases they have. Stated more simply, if they start losing money they will add a surcharge, they are not going to lose money just to be nice.

What's funny with the price of oil, is that if you factor inflation and trend the "real" price oil (less inflation)--it is still below its average price since 1971. So as the price of oil rises and seemingly nothing can halt it, the reason the price could be going up, is because it needs to.



Keep on truckin'...
User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 59
Reply 2, posted (9 years 11 months 3 weeks 3 days 14 hours ago) and read 2298 times:

As I said in an earlier post, it depends on where the carriers hedge their oil...from what I remember, WN is hedged for this year in the $20's and UA hasn't done any hedging............I do no know about the others.......

I think when WN/B6 add a fuel surcharge, then it will stick...hopefully they will do it soon.........



"Up the Irons!"
User currently offlineKen777 From United States of America, joined Mar 2004, 8269 posts, RR: 8
Reply 3, posted (9 years 11 months 3 weeks 3 days 13 hours ago) and read 2285 times:

The price of oil, adjusted for inflation, may be below the average price since 1971 but the price of most tickets are far lower than they were in those days. That's where the real problem lies.

As for the airlines, the task now is to work out what they will do when oil stays at $50 or goes to $60. Hedging can only last for so long and this is going to impact everything from aircraft retained (or purchased) to what routes they are going to fly.


User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 4, posted (9 years 11 months 3 weeks 3 days 13 hours ago) and read 2269 times:

Gas is up $.20 a gallon on airlines. Everyone is starting to take it in the rear. Time for new fuel efficient "right capacity" birds, not some 555 passenger 3,000 gallon an hour hunk of crap from Airbus.

User currently offline7E72004 From United States of America, joined Mar 2004, 3587 posts, RR: 2
Reply 5, posted (9 years 11 months 3 weeks 3 days 13 hours ago) and read 2260 times:

How much fuel is the 7E7 supposed to save over current aircraft such as the 767/757, etc? I guess the question is will the 7E7 relieve a little of the pressure of high fuel prices?


The next generation of aircraft is just around the corner!
User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 6, posted (9 years 11 months 3 weeks 3 days 13 hours ago) and read 2254 times:

1300 GPH vs 1750 in a 767. For 2,000 some odd aircraft:

9 Million gallons a day, or:

78.125 Million Barrels a year.

[Edited 2004-09-28 18:23:43]

User currently offlineTomFoolery From Austria, joined Jan 2004, 529 posts, RR: 2
Reply 7, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2242 times:

I'm waiting for the post titled

"XYZ airlines crew passes the hat for gas money..."

It's just a matter of time before someone cracks and starts some new bull$hit fee to pay for fuel. "Boarding Fee", or "Check-in fees" (the latter is likely sooner rather than later). When was the last you ever saw a fee rescended?
Did they ever rescend the fuel surcharges implimented in 2000? (US, UA, DL, CO) I dont know that the European carriers or other international carriers put this in place as the Washington Post tends to forget that unless we have a war therer, the rest of the world doesnt really exist.

rant over

TF



Paper makes an airplane fly
User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 8, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2235 times:

They just raised the prices and it's now hidden.

User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 9, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2224 times:

7E72004 wrote:

"Gas is up $.20 a gallon on airlines. Everyone is starting to take it in the rear. Time for new fuel efficient "right capacity" birds, not some 555 passenger 3,000 gallon an hour hunk of crap from Airbus."


Never had such a laugh after reading that kind of b...! It's not the total amount of gas consumed per hour which counts, but it depends on the average amount of gas consumed per passenger. So the more people are on one plane, the more fuel efficient it is.
The A380 will be offering 20% lower operating costs than the B747...I think it's exactly the way to go in the future.

And before blaming Airbus for building a fuel efficient aircraft (which will in total reduce fuel consume per passenger), some Americans should go to their garage and think about the appropriate size of their cars. Fuel guzzling SUVs and other trucks or other crap are much more a problem today, not airliners.


Regards
Udo


User currently offlineMoman From United States of America, joined Aug 2004, 1054 posts, RR: 4
Reply 10, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2221 times:

"And before blaming Airbus for building a fuel efficient aircraft (which will in total reduce fuel consume per passenger), some Americans should go to their garage and think about the appropriate size of their cars. Fuel guzzling SUVs and other trucks or other crap are much more a problem today, not airliners."

I trend to agree with Udo. Funny how passengers will complain about a $5 fuel surcharge and on the way to the airport stop and spend $60 to fill up an SUV and buy a $2.79 24-oz. bottle of water at the terminal.

Moman



AA Platinum Member - American Airlines Forever
User currently offlineTomFoolery From Austria, joined Jan 2004, 529 posts, RR: 2
Reply 11, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2211 times:

Udo,
Great point with the SUV. There is no reason that a family of 4 would need a small bus to tote kids back and fourth to the market. It is also not helping that people are moving further and further out from cities and longer and longer commutes to work every day. Granted, I had to spend a bit to get my 10 minute commute, but it's worth only having to fill my tank once every 3 weeks.
I tend to see the airline industry differently. Simply mass transit. The recession has really made airlines operate more efficiently. There are a lot fewer empty (or less than half full) flights leaving the airports now. Airlines have either scaled back frequencies, changed to more appropriate equipment or beefed up sales to fill a/c. During a recession is when the transportation industry is at its weakest, and these fuel prices are really taking a toll. I've no doubt that more sheep will be separated from the herd (NOTE: I'm not talking about US Airways).

TF



Paper makes an airplane fly
User currently offlineTW741 From Liechtenstein, joined Sep 2004, 478 posts, RR: 0
Reply 12, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2197 times:

Udo:
some Americans should go to their garage and think about the appropriate size of their cars. Fuel guzzling SUVs and other trucks or other crap are much more a problem today, not airliners
 Big thumbs up - made me laugh - and you earned my respect for that ...

@TF - most European & Far East carriers (excluding the LCC's) have fuel surcharges on tickets - a detailed list (.pdf file - written in German but understandable for non-German speaking readers) can be found here: http://travelfax.at/downloads/treibstoffzuschlagstabelle.pdf

I'm wondering when European LCC's will start to apply higher ticket prices. Recently there was an interview with Niki Lauda (FlyNiki) and he was also asked regarding the fuel surcharge. He answered this question "there will still be 29 EUR tickets available - but the others will be a little more expensive meaning that we will just have less tickets at the 39 and 49 Euro range.."

Which means a wrong picture - the "bad legacies" apply surcharges and the "good LCC" does not - but actually they do...

=TW741=




TWA - we showed you how good we have been!
User currently offlineAa777flyer From , joined Dec 1969, posts, RR:
Reply 13, posted (9 years 11 months 3 weeks 3 days 12 hours ago) and read 2190 times:

Well the main issue is that the industry CANNOT sustain $50 a barrell oil prices given todays revenue environment. If WN were paying market rate for fuel as are some of the legacy carriers WN too would be loosing money. You can bet WN will not beable to continue to hedge at $25 into 2006. Their hedge runs out at YE2005. The American public needs to realize they cannot fly anywhere they want for $99.

User currently offlineBmacleod From Canada, joined Aug 2001, 2274 posts, RR: 0
Reply 14, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2184 times:

Oil is at $50 for a few reasons:

1. Trouble in Nigeria
2. Production delays caused by Hurricane Ivan
3. Greedy China wanting more oil than it needs.

These factors will be overcome in a few weeks so oil will soon head down to $30-40 barrel.



The engine is the heart of an airplane, but the pilot is its soul.
User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 15, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2182 times:

One problem people have to realize is that airliners and their modern engines are not the fuel guzzlers - aircraft are already very efficient and the development goes on fast. The next generation of engines for the A380 and the B7E7 will again show a massive decrease in consumption.
It's the damn f.... cars (and not to forget masses of ships) where fuel consumption has not really decreased very much over the past years and decades. Car engines could be 50% (or even higher) more fuel efficient today - the technology exists - but the industry doesn't react. Why should they? Obviously the consumers just don't care - gas for cars still seems to be relatively cheap. Well, not in Europe with our high gas prices, but gas in the U.S. still is dirt cheap in comparison. And don't forget China...it won't be funny for the oil price development and the worldwide environment when some several hundreds of millions of people want to start to drive in the near future...

In the end, it's the airline business to suffer, though being very efficient already...


Regards
Udo


User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 16, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2173 times:

Sorry, I don't agree Bmacleod.

1. Nigeria is not safe at all. I fear it's just about the start of wider conflicts in the country. Even a massive civil war is possible. It's really sad that the seventh largest oil producing country in the world is still driven by chaos - well, no wonder, most of the oil revenue went into pockets of rich companies abroad. And the normal Nigerians have never enjoyed benefits from the oil. That's an aspect of globalisation WE ALL have to think about. Countries are getting exploited so that we can fly and drive cheaply and then we wonder about the oil price exploding as soon as these countries get instabile. And Nigeria is just one example.

2. Have we forgot that the oil price has already almost hit the 50$ per barrel before the hurricanes started? That's nothing but an excuse.
And even if it were an excuse: expect more hurricanes in the future than we are used to...the phenomenon is called 'global warming'...

3. China is only just about starting. As I said, the industry is booming, millions of people want to drive. Their demand for oil will increase massively in the next years and decades.

4. Just let something big happen in Saudi-Arabia, and we get a new oil crisis. Al Quaida has for a long time targeted the country - if they blow up one raffinery, then 50$/barrel will be regarded as cheap...


So, I fear the problem won't be gone soon...let's face reality.


Regards
Udo


User currently offlineBmacleod From Canada, joined Aug 2001, 2274 posts, RR: 0
Reply 17, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2170 times:

then 50$/barrel will be regarded as cheap...

Well, if that's the case, the global airline industry would grind to a halt
and I can't see that happening.....



The engine is the heart of an airplane, but the pilot is its soul.
User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 18, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2157 times:

I only meant that a price of 50$/barrel will be seen as cheap IF anything happens in Saudi-Arabia. And I regard Saudi-Arabia and their raffineries as extremely vulnerable to terrorists...so we shouldn't be surprised about such a worse case scenario. The whole damn world economy depends on stability in that country...I can only hope the right people know that, too.


Regards
Udo


User currently offline7E72004 From United States of America, joined Mar 2004, 3587 posts, RR: 2
Reply 19, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2150 times:

Udo...you better reread what i wrote...i mentioned NOTHING about price of fuel...please reread my earlier post and think before you write.


The next generation of aircraft is just around the corner!
User currently offlineMcGoose From Sweden, joined Aug 2004, 37 posts, RR: 0
Reply 20, posted (9 years 11 months 3 weeks 3 days 11 hours ago) and read 2145 times:

3. Greedy China wanting more oil than it needs.

If they'd using as much oil per capita as we do here in Europe, or worse as in the US, the oil price would probably double. So don't put the blame on China, the problem is really Europe and the US.


User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 21, posted (9 years 11 months 3 weeks 3 days 10 hours ago) and read 2140 times:

Just want to clear something:

Of course I meant "Boeing7E7" and his comment in my first post on that topic. Too many 7E7-nicknames around here, easy to mix up!


Regards
Udo


User currently offlineFlyingbronco05 From United States of America, joined May 2002, 3840 posts, RR: 2
Reply 22, posted (9 years 11 months 3 weeks 3 days 10 hours ago) and read 2126 times:

I like what Leno said last night.

If I pay $50 to fill up my whole tank, I demand the whole barrel!

I agree. Why should I pay $50 for fuel (what a barrel is) and only receive a partial amount of the barrel?



Never Trust Your Fuel Gauge
User currently offlineSfo777 From United States of America, joined Sep 2004, 19 posts, RR: 0
Reply 23, posted (9 years 11 months 3 weeks 3 days 10 hours ago) and read 2119 times:

The U.S. government is going to have to initiate an across the board 'fuel - fee' if they want anyone but Southwest not in bankruptcy by the end of this winter - while some debate that the increase is due to concerns about capacity in the U.S., others suggest that the issue is that we have reached the point where demand is starting to outpace supply. Luckily Southwest flies into the SF Bay Area though so we should be fine!

http://www.oilcrisis.com/


User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 24, posted (9 years 11 months 3 weeks 2 days 17 hours ago) and read 2052 times:

Thanks for posting the link, seems to be an interesting website!


Regards
Udo


25 Post contains images FriendlySkies : We knew this day would come...time to start developing the first corn-powered airliners!
26 Boeing7E7 : Never had such a laugh after reading that kind of b...! It's not the total amount of gas consumed per hour which counts, but it depends on the average
27 IL76TD : Flyingbronco05 You actually get 37% of the barrel for $50. The other 63% is Refining costs: 13% Distribution, Marketing, Retail Expenses: 14% State an
28 Sebolino : I agree. Why should I pay $50 for fuel (what a barrel is) and only receive a partial amount of the barrel? Because if you put crude oil in your tank,
29 Sebolino : 1. Trouble in Nigeria 2. Production delays caused by Hurricane Ivan 3. Greedy China wanting more oil than it needs. I'm a little surprised by these r
30 Hawaii12 : The real reason for the increase in uncracked crude recently is layered. Firstly, the oil comany's and refiners actual physical holding of crude has d
31 Post contains images Udo : Boeing7E7, It’s not only me assuming the A380 can be filled but it’s obviously also the managers of 13 (successful) airlines which have ordered th
32 YVRtoYYZ : Why I don't understand is why some airlines didn't lock into contracts on a flat fuel rate when prices were $36-$36 US/barrel. Almost 30% of Quebecers
33 LTBEWR : The problem of a government mandated 'fuel price surcharge' is that the airlines would probably adjust downward their fares to the difference. There m
34 Hawaii12 : YVRtoYYZ By the time most airlines wanted to hedge the price of oil, it was too late. In order to lock in a price at 30-35 (when current prices are at
35 Boeing7E7 : Btw, how do you know ‘Airbus has guessed wrong’? Last time I checked we still had September 2004, not September 2006. Can you tell me the magic tr
36 Udo : Now it gets indeed interesting. Can you please articulate what exactly you mean with ‘limited competitive environment’? Do you mean the slot limit
37 McGoose : It's a big country over here. Going car-less is not an option. Seeing as our contribution to the global economy is 20 times greater than yours and we
38 YVRtoYYZ : In order to lock in a price at 30-35 (when current prices are at 45-50), you have to pay a very high premium. I am aware that if you want to lock in a
39 SATL382G : There are just too many SUV and trucks, pick-ups or whatever running in the U.S., and they run just because gas is dirt cheap compared to Europe. The
40 Udo : Oh, I know it’s a big country over there. And I have never claimed that CAR-LESS is an option! I also live in an area in Bavaria where we all need c
41 Boeing7E7 : The US accounts for 22% of the Global Economy. Germany 4%. Factor in the production per person and you arrive at 20:1. Ref the 380: It will serve airl
42 Udo : SATL382G, First of all, most European countries have a speed limit. Germany is one of the very few countries where you can go 120 MPH or faster. And t
43 Post contains images Iowaman : We knew this day would come...time to start developing the first corn-powered airliners! If that happens then maybe us farmers can actually make money
44 Flying-Tiger : @ Iowaman: that fuel is already existing, and in Europe refineries are just starting to add bio-ethanol (97%) to regular gas (share about 95% gas, 5%
45 SATL382G : First of all, most European countries have a speed limit. Germany is one of the very few countries where you can go 120 MPH or faster. And there aren
46 SATL382G : that fuel is already existing, and in Europe refineries are just starting to add bio-ethanol (97%) to regular gas (share about 95% gas, 5% bio-ethanol
47 Jacobin777 : regardless....we still consume > 20% of the worlds oil, with only 5%-8% of the worlds population.........China on the other hand is 3-4 times larger t
48 Post contains images Udo : SATL382G, What is the average European? Quite a funny expression. You might have had some time over here but I can tell you since our government intro
49 SATL382G : The new reality is alternative fuels, particularly hydrogen and the so-called hydrogen economy. When the logistics and economics of hydrogen become do
50 Prebennorholm : No-no-no SATL382G, in 10-15 years time NW DC-9s will still guzzle Jet A.
51 Boeing7E7 : Udo... Do your own research.
52 Post contains images Udo : Boeing 7E7, Is that all you can add? No more answers? I have done my research, you obviously haven't... Regards Udo
53 IL76TD : Udo, You're from a country which in 1998 decided to ban nuclear power production. Then, to mask their stupidity, the legislature voted in 2000 to allo
54 5NEOO : Nigeria is not safe at all. I fear it's just about the start of wider conflicts in the country. Even a massive civil war is possible. It's really sad
55 Angelairways : I THINK THE HIGH FUEL PRICE IS A FANTASTIC THING!!!! I hope it gets even higher and stays that way for a while. Then it will really make everyone sens
56 Post contains links TW741 : All this technology is driven by high fuel costs. In Austria you even have the choice between "Diesel" and "Bio-Diesel" at gas-stations. "Bio Diesel"
57 Udo : IL76TD, Just because I am from Germany, does it mean I agreed with the government’s decision in 1998? No! However, the deal was made and we have to
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