VV701 From United Kingdom, joined Aug 2005, 8112 posts, RR: 25
Reply 2, posted (5 years 8 months 2 weeks 6 days 4 hours ago) and read 14141 times:
It is possible that the most profitable airlines for 2008 were and for 2009 will be those airlines that took what has turned out to be the best (or most lucky) view on the likely price of oil. So BA who hedged 70 per cent of their 2009 fuel needs at a price equivalent to $71 a barrel - almost exactly the current price - should come out near the middle of the list for 2009.
The 2009 winner should be the airline that hedged most of its 2009 fuel requirements back when the price of oil fell to just above $30 a barrel very early this year. The real losers will be those airlines that hedged their fuel needs for 2009 back just over a year ago when crude was $147 a barrel and most "experts" were predicting $200 oil round the corner.
I do not think that in the vast majority of cases the profits reported for either 2008 or 2009 will reflect whether or not the airline was operationally well run. In some cases we will have to hope that the losses made by those airlines who took what has turned out to be a wrong view on the oil price will manage to survive the resulting shock and live to fly another day.
A further thought looking further into the future. If the world is still in recession but the oil price has rebounded from a low of just above $30 to more than double in reaching today's price of $72 what will happen when the world economies return to sustained growth?
Will oil go back to $100, accelerate to $200 or balloon to $300 a barrel. If I was in the fuel buying department of a major airline I might go for the $300 price. But if I did the price would probably collapse to $40 over the following month or two.