n844aa
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Joined: Fri Jul 18, 2003 10:38 am

How Did Airlines Cope With Early 80s Fuel Costs?

Wed Apr 20, 2005 2:36 am

So usually when reading an article about high oil prices, most decent articles will include a line saying something along the lines of "however, in inflation adjusted terms, today's $55 barrel is well below the 1981 peak of $80 a barrel."

At that point of the deregulation process, were there still price controls in place? If not, how did the airlines cope with fuel at $80/barrel? I seem to recall reading that that was a time of deeply discounted promotional fares ($99 transcons, which yeah, is not so remarkable now) but those might have come a few years later.

Obviously you didn't have the pricing pressure of the LCCs, but if airlines today are so adversely affected by $55/barrel, I don't see how any of them could have continued to operate for very long at $80/barrel, at least given the exposure most of the majors have to oil prices. Yet the only airline to go out of business that I can think of off the top of my head around that time is BN, and I'm not sure how much oil prices had to do with that (though Concorde surely didn't help!) And in general, planes were much less fuel efficient back then. All those 727s, and I think at that point, AA (for example) hadn't even fully retired their 707s.

So what happened back then? Were the airlines able to raise their prices as needed, or did a lot of airlines I'm not familiar with go out of business? Or were price controls still in place? Or was the price shock relatively brief? Heh, lots of possibilities, and it might not be any of these.
New airplanes, new employees, low fares, all touchy-feely ... all of them are losers. -Gordon Bethune