Why high oil prices are actually good for airlines

Discussion in 'General Discussion | Travel' started by Newscience, Apr 18, 2014.  |  Print Topic

  1. Newscience

    Newscience Gold Member

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  2. anileze

    anileze Gold Member

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    No airline worth it's salt, buys fuel on stop. They have complex hedges for fuel. So, what they pay today, it what they hedged few years ago.
     
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  3. Newscience

    Newscience Gold Member

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    And that is precisely how WN has survived and grown over the recent past.
     
  4. gregm

    gregm Gold Member

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    Fuel and pork bellies. :confused: Of course many more commodities. I wonder at what point did 'normal' stock trading become hedging and futures.
     
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  5. blackjack-21

    blackjack-21 Gold Member

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    Around the time that OJ futures started to get affected by the frosts in Florida.
     
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  6. pointshogger

    pointshogger Silver Member

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    Great article. Great read. I am glad that airlines are making a conscious effort to find more fuel efficient ways to operate, rather than pass on the expenses to customers. Though airfares may still have gone it, they probably could have gone up a lot more considering that fuel prices have more than doubled over the last decade.

    With the recent spike in gas prices, hopefully this will encourage even more innovation for fuel efficiency technologies.
     
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  7. Newscience

    Newscience Gold Member

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    An interesting observation, pointshogger! Although Detroit and the oil companies appear to have minimal motivation to develop fuel efficiency, the airline industry has very strong incentives to do so. The time for new airplane development and construction is considerably greater than that for automobiles, but it would be no surprise to see more energy efficient airplanes coming on line in the future.
    Newscience
     
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  8. HaveMilesWillTravel
    Original Member

    HaveMilesWillTravel Gold Member

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    I don't think airlines hedge all their fuel purchases.

    http://usatoday30.usatoday.com/money/industries/travel/2008-07-23-southwest-jet-fuel_N.htm

    And it doesn't always work either:

    http://www.nbcnews.com/id/26761843/#.U1PzBpK9KK0

    Personally, I am hedging my gas purchases by buying Arco gift cards at the grocery store. I get 2 UA miles per dollar (Arco doesn't take credit cards) and I lock in the price of $50 per card :D
     
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  9. gregm

    gregm Gold Member

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    Publix, our local grocery chain, often has a promo where you can get a $50 gas gift card for $40 with a minimum $50 purchase per card. I take advantage as much as possible. That's about the best I can do, lol.
     
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  10. blackjack-21

    blackjack-21 Gold Member

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    While I agree that newer more fuel efficient aircraft are needed and may be coming down the line, still the costs of those planes will be very high (as most other things are continually increasing nowadays) and while in time they may help improve the airline's bottom line, still the savings for the pax will be minimal, if at all. Reasons being that by purchasing those new costly aircraft the airlines will have to jam as many more seats into them as possible to help pay for buying or leasing them, all the while increasing ticket costs as we've already seen in recent years with the fuller planes, and unless and until the airlines can get a full fleet of the newer models, just a few of them arriving won't cut the fuel costs for the airlines appreciably at first. So while the fuel efficient planes may be good for the environment and the airlines, the immediate effect for the flying public will be minimal for some time, IMO.

    And when is the last time you can remember any airline CUTTING their fuel surcharges and ticket prices when fuel costs declined? I must have missed that if it happened!
     
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