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Oil Is At $71 And Falling, Airlines To Improve $$?  
User currently offlineStarrion From United States of America, joined Jul 2003, 1126 posts, RR: 2
Posted (6 years 1 week 2 days 2 hours ago) and read 6816 times:

Fuel has the biggest impact on the Airline's balance sheets. I know a number of airlines are locked in (several at higher prices), so how soon should we see a positive impact on airlines profits?

Will this alter aircraft retention and acquisition plans?


Knowledge Replaces Fear
40 replies: All unread, showing first 25:
 
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 1, posted (6 years 1 week 2 days 1 hour ago) and read 6777 times:

I doubt it affect what airplanes bigger airlines are getting, smaller regional airlines could be affected by it.
I´m sure most airlines are hedgefunded with their fuelcost and it´s all about when the contracts are out if they benefit from this. Remember 20US$/barrel oil, it wasn´t that long ago...


User currently offlineLegacyins From United States of America, joined Aug 2003, 2091 posts, RR: 0
Reply 2, posted (6 years 1 week 2 days 1 hour ago) and read 6707 times:

The problem now is not with the fuel prices. The problem now is that people can't afford to fly because of the economic mess we are in. Our Office has suspended travel for the next few months.


John@SFO
User currently offlineCloudyapple From Hong Kong, joined Jul 2005, 2454 posts, RR: 10
Reply 3, posted (6 years 1 week 2 days 1 hour ago) and read 6694 times:



Quoting Starrion (Thread starter):
Oil Is At $71 And Falling, Airlines To Improve $$? 

Dow Jones is at 8230 and falling, so is the NASDAQ, FTSE, CAC, DAX, Nikkei, Hang Seng... Now who's flying on business?



A310/A319/20/21/A332/3/A343/6/A388/B732/5/7/8/B742/S/4/B752/B763/B772/3/W/E145/J41/MD11/83/90
User currently offlineIkramerica From United States of America, joined May 2005, 21544 posts, RR: 59
Reply 4, posted (6 years 1 week 2 days 1 hour ago) and read 6666 times:



Quoting Legacyins (Reply 2):
The problem now is not with the fuel prices. The problem now is that people can't afford to fly because of the economic mess we are in.

But with fuel prices 1/2 of what they were, airlines should be able to drop fares on some routes to keep traffic up.

Not the silly fare wars of the past, but rational pricing? Well, maybe not.



Of all the things to worry about... the Wookie has no pants.
User currently onlineMaverickM11 From United States of America, joined Apr 2000, 17670 posts, RR: 46
Reply 5, posted (6 years 1 week 2 days 1 hour ago) and read 6641 times:



Quoting Legacyins (Reply 2):
The problem now is not with the fuel prices. The problem now is that people can't afford to fly because of the economic mess we are in

Jamie Baker is convinced that the drop in oil price (plus the capacity cuts that have already taken place) far outweighs the economic downturn, and US carriers will turn a profit in 2009 if oil stays low.



E pur si muove -Galileo
User currently offlineHatbutton From United States of America, joined Mar 2005, 1500 posts, RR: 14
Reply 6, posted (6 years 1 week 2 days 1 hour ago) and read 6642 times:



Quoting Ikramerica (Reply 4):
But with fuel prices 1/2 of what they were, airlines should be able to drop fares on some routes to keep traffic up.

Again, the price of oil dropping hasn't meant that the price of Jet-A has dropped. It is still much higher than it was this time last year.


User currently offlineTonytifao From Brazil, joined Mar 2005, 1029 posts, RR: 0
Reply 7, posted (6 years 1 week 2 days 1 hour ago) and read 6587 times:



Quoting Hatbutton (Reply 6):
Again, the price of oil dropping hasn't meant that the price of Jet-A has dropped. It is still much higher than it was this time last year.

What will cause the price of JET-A to drop?


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6245 posts, RR: 34
Reply 8, posted (6 years 1 week 2 days ago) and read 6538 times:



Quoting MaverickM11 (Reply 5):
Jamie Baker is convinced that the drop in oil price (plus the capacity cuts that have already taken place) far outweighs the economic downturn, and US carriers will turn a profit in 2009 if oil stays low.

He's "convinced"?? Obviously he doesn't know what else to say... house prices are expected to continue falling throughout 2009 and perhaps even longer. We are in a global financial crisis... the worst since 1929.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlinePar13del From Bahamas, joined Dec 2005, 7382 posts, RR: 8
Reply 9, posted (6 years 1 week 2 days ago) and read 6505 times:



Quoting Hatbutton (Reply 6):
Again, the price of oil dropping hasn't meant that the price of Jet-A has dropped. It is still much higher than it was this time last year.

Agree, but then they can kick in the market gimmick. Business travel will definately go down, they are for the most part market watches and followers, leisure travel on the other hand, jumps on a bargain, so they could be used to keep loads up. When the price of oil rose, the fuel surcharge went up almost immediately, rather than continuing to milk the situation, airlines could give some back to maintain load factors.

Just a thought.


User currently offlineBurnsie28 From United States of America, joined Aug 2004, 7554 posts, RR: 8
Reply 10, posted (6 years 1 week 2 days ago) and read 6505 times:



Quoting Ikramerica (Reply 4):
But with fuel prices 1/2 of what they were, airlines should be able to drop fares on some routes to keep traffic up.

Airlines still need money and dropping fares isn't going to do it since nobody knows where the markets are going.

Quoting MaverickM11 (Reply 5):
Jamie Baker is convinced that the drop in oil price (plus the capacity cuts that have already taken place) far outweighs the economic downturn, and US carriers will turn a profit in 2009 if oil stays low.

I don't trust him for $1. Everyone said airlines would post profits in 2008... and that was out of the books pretty soon.

Also as usual OPEC and the Iraqi's released a statement that said "$100 barrel is fair and acceptable for both producers and consumers" I wish all of the people at OPEC would get their head out of the you know whats. They also are threatining to cut production... ie price fix. Exactly why here in the US we need to start tapping into our oil and cut energy so we can flick off OPEC and watch as they struggle to gain any money from their unfair practices.



"Some People Just Know How To Fly"- Best slogan ever, RIP NW 1926-2009
User currently offlineSunriseValley From Canada, joined Jul 2004, 5055 posts, RR: 5
Reply 11, posted (6 years 1 week 2 days ago) and read 6501 times:



Quoting Hatbutton (Reply 6):
Again, the price of oil dropping hasn't meant that the price of Jet-A has dropped. It is still much higher than it was this time last year

Correct, don't pay too much attention to the crude price. Rather track the Jet fuel price . A link is :

http://tonto.eia.doe.gov/dnav/pet/hist/rjetsin5m.htm

Quoting Tonytifao (Reply 7):
What will cause the price of JET-A to drop?

a reduction in demand and/or over production by refineries. Don't forget this is a supply and demand market.


User currently offlineCasInterest From United States of America, joined Feb 2005, 4672 posts, RR: 2
Reply 12, posted (6 years 1 week 2 days ago) and read 6485 times:

The Airlines will only improve if the recession is short lived.

Oil is down because demand is expected to be down.

Factories are closing.
Companies are laying off employees.
Travel is being restricted by Corporations.


At this point the only thing that can save the Airlines is for people to travel, which they will not be inclined to do during a recession.

It is looking bleak for now.


Of course at some point a bottom will have to be reached, but at this point it is not clear where the bottom will be.



Older than I just was ,and younger than I will soo be.
User currently offlineLAXintl From United States of America, joined May 2000, 25776 posts, RR: 50
Reply 13, posted (6 years 1 week 2 days ago) and read 6426 times:

Couple points:

The drop in crude oil prices has not translated as fast drop in Jet-A as there is something called the "crack spread" which is the the difference between buying and selling contracts in crude oil and one or more derivative products (Jet-A), basically what the middle men like refiners make on it. This has actually risen and sits in the $30-40 range making a $75/bbl cost $105-115.

Additionally the rapid decline in crude prices will have significant negative balance sheet implications for airlines as many are locked into positions at higher then market spot rates, or must write down the value of future hedges. Just look at Southwest and the loss they reported today due to hedging activity.

At the end of the day the volatile oil pricing eventhough its downward is not the best news for airlines. Airlines need stability so they can plan and operate based on some known parameters.

Lastly off course the worlds overall black economic clouds could turn out to be even more harmfull to airlines then oil prices were if market demand is for seats is sucked out.



From the desert to the sea, to all of Southern California
User currently offlineRobsawatsky From Canada, joined Dec 2003, 597 posts, RR: 0
Reply 14, posted (6 years 1 week 2 days ago) and read 6390 times:



Quoting Burnsie28 (Reply 10):
Also as usual OPEC and the Iraqi's released a statement that said "$100 barrel is fair and acceptable for both producers and consumers" I wish all of the people at OPEC would get their head out of the you know whats. They also are threatining to cut production... ie price fix. Exactly why here in the US we need to start tapping into our oil and cut energy so we can flick off OPEC and watch as they struggle to gain any money from their unfair practices.

Yes, OPEC is a cartel with the goal of keeping oil prices high, which would be illegal if the oil was extracted elsewhere. But of course, all oil producers benefit from the high crude prices that OPEC creates.

The US will never produce enough oil to eliminate imports. Even if they took off all the restrictions today, it would take decades to get it on stream and no one is building refineries to produce the end products that the retail level actually needs. By the time it comes on-line, even the middle-east may be running short on reserves. Besides, those new untapped oil reserves are generally expensive and are only profitable because OPEC keeps crude prices high. There is no magic bullet for an commodity that is becoming progressively more expensive to get.


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6245 posts, RR: 34
Reply 15, posted (6 years 1 week 2 days ago) and read 6390 times:



Quoting Burnsie28 (Reply 10):
Exactly why here in the US we need to start tapping into our oil and cut energy so we can flick off OPEC and watch as they struggle to gain any money from their unfair practices.

FYI, tapping into our oil is not going to make ANY difference!

We have ONLY 3% of world crude reserves BUT consume 25% of world oil production.

We will never be able to flick off OPEC... ever - unless we move away from oil as a transport fuel!



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineRichm From United Kingdom, joined Oct 2004, 803 posts, RR: 7
Reply 16, posted (6 years 1 week 1 day 23 hours ago) and read 6330 times:

So for those airlines who hedge their fuel for a specified period, is it likely/possible that they will now be paying more for fuel now compared to competitors who don't have any such agreements? I know Ryanair does this, but I'm not sure how it will affect them.

- Rich


User currently offlineLipeGIG From Brazil, joined May 2005, 11442 posts, RR: 58
Reply 17, posted (6 years 1 week 1 day 22 hours ago) and read 6206 times:
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Quoting Legacyins (Reply 2):
The problem now is not with the fuel prices. The problem now is that people can't afford to fly because of the economic mess we are in.

100% right.

Quoting Starrion (Thread starter):
Fuel has the biggest impact on the Airline's balance sheets. I know a number of airlines are locked in (several at higher prices), so how soon should we see a positive impact on airlines profits?

As explained by LaxIntl also, some airlines lock good portions of their fuel needs at prices higher than current fuel prices, so IMO, we shall see just slight improvement.

Quoting Starrion (Thread starter):
Will this alter aircraft retention and acquisition plans?

I doubt, the big problem now is the demand which seems to be lower compared to past year. Acquisition will be driven by fleet replacements and just a few airlines will continue to increase it's fleet.



New York + Rio de Janeiro = One of the best combinations !
User currently offlineKhobar From United States of America, joined Mar 2006, 2379 posts, RR: 4
Reply 18, posted (6 years 1 week 1 day 22 hours ago) and read 6188 times:



Quoting Ikramerica (Reply 4):
Not the silly fare wars of the past, but rational pricing? Well, maybe not.

Maybe we should get Barak on the job. He's all about fairness, right?

Quoting Tonytifao (Reply 7):
What will cause the price of JET-A to drop?

drop in demand.

Jet-A is only worth what people are willing to pay for it, and people won't pay much for something they can't sell.

Quoting SunriseValley (Reply 11):

Correct, don't pay too much attention to the crude price. Rather track the Jet fuel price . A link is :

When fuel prices go up, it's because the price of oil (according to the news). When fuel prices stay up despite the drop in oil, the price of oil is said to be less of a factor (according to the news).

This is having one's cake and eating it too. I just wish

Quoting Robsawatsky (Reply 14):
The US will never produce enough oil to eliminate imports. Even if they took off all the restrictions today, it would take decades to get it on stream and no one is building refineries to produce the end products that the retail level actually needs. By the time it comes on-line, even the middle-east may be running short on reserves.

Why not? The refining capacity is CURRENTLY in place. Otherwise the loss of refining capacity in a certain part of the US wouldn't be that big a deal (LOL). When was the last time the media challenged the oil industry for running refineries well below capacity? At any other time on any other topic, the oil industry would be raked over the coals.

Quoting Planemaker (Reply 15):
We have ONLY 3% of world crude reserves BUT consume 25% of world oil production.

There's a huge difference between reserve and production.

And I would say the US is now using less than 25% of world production.  Wink


User currently offlineIkramerica From United States of America, joined May 2005, 21544 posts, RR: 59
Reply 19, posted (6 years 1 week 1 day 22 hours ago) and read 6155 times:



Quoting Burnsie28 (Reply 10):
Airlines still need money and dropping fares isn't going to do it since nobody knows where the markets are going.

Airlines are already dropping fuel surcharges, so whatever you guys want to believe, the airlines do know that lower oil prices lead to lower fuel prices, and that they can drop prices (via the fuel surcharge) a bit and still make money on the flight.

Additionally, the airlines have been on a fare RAISING trend recently, and by my count, they may have tried to take it too far (based on recent transcon fares I've seen for advanced purchase), so what may really happen is a moratorium on these increases and some readjusting of certain routes (not all routes) to a point that people can afford if those routes had risen too high.

I've been one of those saying fares were too low for a long while (airlines charging less than customers were willing and able to pay), but airlines are now testing the fares customers are actually willing to pay and will be hitting a resistance point.

This has lead to sharp increased traffic on Amtrak and inter-city bus services, which is a good thing for the overall transportation infrastructure (not being so flying biased), but it means that airlines are hitting



Of all the things to worry about... the Wookie has no pants.
User currently offlineUA2162 From United States of America, joined Apr 2004, 496 posts, RR: 2
Reply 20, posted (6 years 1 week 1 day 22 hours ago) and read 6120 times:

The extremely simple and "amateur" explanation - it's now a double edged sword. Sure fuel is going down but businesses travelers will simply not fly as much due to the economic situation. My grandfather once told me this and it always seems to be true:

"Careful, you just might get what you wish for."

They wanted the price of fuel to go down. Now it's begun but at what cost?

The fuel surcharges may be dropped as a public relations stunt by some carriers but they'll make their money somewhere else. Remember, the low fares we saw in previous years was a big reason why the airline industry is in the state it is now. They simply weren't making money. I think we can look at TZ and AQ to prove such a point. Regardless of fuel costs there was no way one could make money selling $199 each way fares to mainland from Hawaii.


User currently offlineKhobar From United States of America, joined Mar 2006, 2379 posts, RR: 4
Reply 21, posted (6 years 1 week 1 day 21 hours ago) and read 6106 times:



Quoting Ikramerica (Reply 19):
Additionally, the airlines have been on a fare RAISING trend recently, and by my count, they may have tried to take it too far (based on recent transcon fares I've seen for advanced purchase), so what may really happen is a moratorium on these increases and some readjusting of certain routes (not all routes) to a point that people can afford if those routes had risen too high.

Kinda like oil. Not long ago we had folks on television talking about our oil addiction. A lot of those same folks are now crying about us not being as addicted as they thought. Some have said our lack of addiction is so bad they're recommending upping fuel taxes to make up for the current shortfalls created by the drop in demand, and those taxes will be needed from here on out since America has overnight abandoned the SUV in favor of smaller, more fuel-efficient cars and mass transit.

Doh!

Quoting Ikramerica (Reply 19):
I've been one of those saying fares were too low for a long while (airlines charging less than customers were willing and able to pay), but airlines are now testing the fares customers are actually willing to pay and will be hitting a resistance point.

Good. Airlines need to give their customers a reason to put up with the hassle of flying.


User currently offlineChrisrad From Australia, joined Dec 2000, 1071 posts, RR: 8
Reply 22, posted (6 years 1 week 1 day 20 hours ago) and read 5985 times:



Quoting SunriseValley (Reply 11):


Quoting Hatbutton (Reply 6):
Again, the price of oil dropping hasn't meant that the price of Jet-A has dropped. It is still much higher than it was this time last year

Correct, don't pay too much attention to the crude price. Rather track the Jet fuel price . A link is :

http://tonto.eia.doe.gov/dnav/pet/hist/rjetsin5m.htm

So then if I read the data correctly peak in July was 432.50 cents per gallon, and now its 215.00 cents per gallon? So then whats the argument that it hasn't fallen as much as crude oil?



Welcome aboard Malaysia Airlines! Winner of Best Cabin Staff 2001,2002,2003,2004,2007,2009,2012
User currently offlineChupame From United States of America, joined Jun 2001, 48 posts, RR: 0
Reply 23, posted (6 years 1 week 1 day 20 hours ago) and read 5983 times:

http://edition.cnn.com/2008/BUSINESS...10/15/fuel.surcharge.ap/index.html

User currently offlineTAN FLYR From United States of America, joined Aug 2000, 1916 posts, RR: 0
Reply 24, posted (6 years 1 week 1 day 16 hours ago) and read 5720 times:



Quoting Robsawatsky (Reply 14):
The US will never produce enough oil to eliminate imports. Even if they took off all the restrictions today, it would take decades to get it on stream and no one is building refineries to produce the end products that the retail level actually needs. By the time it comes on-line, even the middle-east may be running short on reserves. Besides, those new untapped oil reserves are generally expensive and are only profitable because OPEC keeps crude prices high. There is no magic bullet for an commodity that is becoming progressively more expensive to get.

Not quite decades..a few years for the closest reserves. Bakken field in MT/ND has hundreds of millions of barrels of crude that can easily be sent to midwest refineries. ANWR can serve teh west coast with more supplies in 7-10 years and known reserves off Florida and Virginia can also flow to Gulf coast/ Philly-NYC area refineries.

These is no problem taking crude from Canada..pretty stable place.

True, no new from teh ground up refineries yet (Arizona Clean Fuels project ) but a number of refiners are adding hundreds of thousands of barrels of daily capacity. Check out Marathon Oil at Garyville, LA, Shell at Port Arthur, TX, Conoco Phillips at Wood River, IL..there are others. We are making progress in adding refining capacity..most now will come on when the economy, and thus demand for air travel increases in 18-30 months.

The question is at what global price will it be again (china/India) for Jet-A.


25 Luv2cattlecall : Please.....sure, some businesses are cutting back, but it's not doom and gloom like the media makes it out to be. Stocks tank around this time of the
26 Apollo13 : What about airlines such as Southwest who hedge their fuel prices. Im sure they will suffer if the price of oil falls below what they paid for the hed
27 Post contains links CYEGsTankers : Less fuel used to do this should help with costs. http://www.airliners.net/photo/North...irlines/Airbus-A319-114/0473034/M/
28 Post contains links and images Kaitak744 : (click to enlarge) The slowing economy does however have a negative effect. Even with low oil prices, Southwest had a loss due to dropping ridership.
29 HAWK21M : Most Airlines would want to recover all their losses accumumated during the hiked prices before passing the benifits on to the PAX. regds MEL
30 Post contains links AndrewUber : For a thorough look at what is going on with Jet-A financially, look here: http://www.iata.org/whatwedo/economics/fuel_monitor/index.htm Currently it'
31 Brilondon : I doubt that this would happen as the cuts in capacity will more then make up for the lowereing of fuel prices. I though salaries make up the singl l
32 YYZflyboy : Please note that Southwest usually feels the pinch first, since the demographic they target is not the usual high-end customer on other major airline
33 PlanesNTrains : I'm curious if this is a documented fact, or if you are assuming that is the case. I'm not challenging the assertion (though I don't believe that it
34 Viscount724 : That used to be the general rule, especially for shorthaul airlines, but with the hike in fuel prices over the past few years, fuel has taken over as
35 EXAAUADL : Oil isnt falling due to an increase in supply...it is falling cuz demand is tanking. YR/YR oil demand in the USA is down 9%. During the 2001 recession
36 EXAAUADL : that's totally untrue...In the past WN has actually benefitted from recession, by growing where otehr airlines have shrunk like ML in 1991. Your stat
37 Smcmac32msn : Yay! We have 3% of what anybody has in tanks! We're special! Think about it this way, you just said we have 3% of what we have in tanks ALREADY. Not
38 Smcmac32msn : Seriously??? Alright, say an airline (we wont mention names - YX) has 100 people working the ramp at an airport (another one we won't mention - MKE).
39 MilesDependent : ....You're damned if you do and you're damned if you don't.... Oil is cheap but demand is really low (especially premium) due to the share market coll
40 Planemaker : Please read up on the definition of crude reserves. You won't be "cheering" after you do!
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