Oil down to US$74 a barrel - Airline relief on the horizon?

[NickN]

US$74 a barrel is 50% less than just a few months ago. Could we see some relief for airlines around the globe?

Albeit there are hard economic times globally and there may be small reductions in passenger loads this would be more then offset by the fall in fuel bills.

It is quite likely with a global recession on the horizon that the price will fall even further or stabilize around this level for the forseeable future.

We saw a large number of carriers go the way of the Dodo in the last 6-12 months due to high fuel costs it's a shame they couldn't hang on until now to get some relief, it seems they failed at the final hurdle.

[Michael Morrison]

Originally Posted by NickN

We saw a large number of carriers go the way of the Dodo in the last 6-12 months due to high fuel costs it's a shame they couldn't hang on until now to get some relief, it seems they failed at the final hurdle.

Actually I think we will see more failures. Any airline that has a lot of debt to renew will most liekly be unable to get new money at the same rates or even get the money at all. I suspect this may be the case for some of the US carriers?

[Greg McDonald]

One thing is for sure.....hell will freeze over before we see any meaningful ticket price relief

Airlines are like banks....put their rates up at the drop of a hat but find a million excuses not to put them down again!!

[NickN]

In defence of the major banks, they very quickly passed on the last rate cut to consumers. Although this is the first time I have ever seen it done this fast and it was primarily a stunt to attract new customers.

Your right on the airfares comment though, they'll keep them up to recover the money they did lose while fuel prices were high.

The folks at V Australia would almost have a fit of the giggles today, compared to when they announced the launch date and now their fuel bill will effectively be 50% less!

[Michael Morrison]

Originally Posted by NickN

The folks at V Australia would almost have a fit of the giggles today, compared to when they announced the launch date and now their fuel bill will effectively be 50% less!

And I wonder how much demand has fallen in that time too? Not a good time to launch to theUS with a low exchange rate and the likelyhood of a US recession

[Erik H. Bakke]

To oversimplify things a bit, the prices fall because demand falls.

The demand is currently falling because of the tough financial climate at the moment. However, the effects of these events have traditionally been temporary, and once the demand starts increasing again the fuel prices will be climbing right back up there.

In the foreseeable future, $150 a barrel is a more realistic price than $75, and the prices we see now are not likely to become the new norm.

Airlines would be wise to continue their cost cutting and fuel efficiency measures as if the price of oil hadn't come down the way it has, otherwise they will be just as ill-prepared when the price goes back up as they were the last time.

However, securing financing for all those new aircraft on the order books may turn out to be significantly harder now, and that will impact on the airlines ability to move to younger fleets.