Joined: Oct 02, 2005 Posts: 284 Location: North Wales , UK
Posted: Tue Nov 06, 2007 6:02 pm Post subject: Re: Aviation Fuel price record
Just changing track a moment , I caught sight of an article in a newspaper (I was waiting to get my hair cut and the person next to me was reading the business section). It was about Ryanair , from what I could see, theyve hedged 90% of their oil costs at $65 a barrel through to March , or May from memory next year, and the boss was looking forward to other low-cost airlines falling foul of the current high oil prices.
Seems that perhaps the people at Ryanair are "peakists" ?
Paul _________________ All that it takes for evil to triumph is for good men to do nothing.
Joined: Apr 05, 2005 Posts: 1627 Location: Springsteen Country (NJ)
Posted: Tue Nov 06, 2007 6:34 pm Post subject: Re: Aviation Fuel price record
Here's that article, or something like it:
Quote:
Also, Ryanair is only fully insured -- or hedged -- against the rising cost of oil until March next year, after which it has partial coverage. This means that Ryanair's costs could soon rise.
Budget airlines, which operate at tight margins, could be particularly vulnerable. Ryanair is hedged at $65 a barrel till next March, but after this period, it is more exposed.
Oil Bogs Down Ryanair _________________ Joe P. United Political Debate
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
Posted: Tue Nov 06, 2007 7:00 pm Post subject: Re: Aviation Fuel price record
PWALPOCO wrote:
Just changing track a moment , I caught sight of an article in a newspaper (I was waiting to get my hair cut and the person next to me was reading the business section). It was about Ryanair , from what I could see, theyve hedged 90% of their oil costs at $65 a barrel through to March , or May from memory next year, and the boss was looking forward to other low-cost airlines falling foul of the current high oil prices.
Seems that perhaps the people at Ryanair are "peakists" ?
Paul
It's all right, you can come out of the closet, you Business Section reader. Sounds like they'll be in trouble in next year then. Race to the bottom, or what?
Posted: Wed Nov 07, 2007 12:33 pm Post subject: Re: Aviation Fuel price record
AirlinePilot said:
Quote:
WHOA! Jetfuel has leaped a lot more than I have ever seen yet.
In 4 days the price has gone from 2.48 to 2.63. Thats the biggest jump Ive seen since I
have been watching this closely.
This does not portend well for the industry.
About a year ago I read a prediction given by the President of the American Airline Association (?). He stated, that in his opinion, $90 oil would shut down most of the country’s major carriers. What is your take on this?
Joined: Apr 05, 2005 Posts: 2464 Location: South of Atlanta
Posted: Wed Nov 07, 2007 5:40 pm Post subject: Re: Aviation Fuel price record
Well so far the crack spread and margins havent caught up yet. I know they will, but right now believe it or not the average per gallon price the airlines are paying is NOT 2.63 a gallon. Its probably down near 2-2.20 right now due to hedging.
At some point everyone except Southwest(still hedged far more than anyone else) is going to feel the pain and it cant go on indefinitely without some changes. At this point I don't have a prediction about when that might be. At first I would expect a reduction in the regional jet traffic followed by a reduction in domestic capacity. International routes, being the most lucrative will be the last to go.
Will 90 or 100 dollar oil kill the industry? Right now I just dont know. If ticket prices increase and we dont lose too much load factor due to that its possible to continue this for quite some time. The huge question no one can answer is when the consumer stops wanting to go by air. I think that may take a lot longer than you think. I do believe the government will attempt to maintain a robust air travel industry because it is a large portion of the economy. They will do this through direct subsidy. When does that start? probably not for a while yet, but I really think this is where we are headed due to PO related problems.
Posted: Wed Nov 07, 2007 6:13 pm Post subject: Re: Aviation Fuel price record
AirlinePilot said:
Quote:
The huge question no one can answer is when the consumer stops wanting to go by air.
I would think that would depend on when they just can’t go. That will depend, I would think, on the general economic condition. If we fall into a recession for a while, it will certainly hurt your industry, but I doubt if it would kill it. If we collapse into a depression, travel would be one of the first discretionary expenditures to significantly decline.
In any case, with PO staring us in the face and abrupt climate change happening, I would be reluctant to give our general economy more than five years. Soon after that, a lot of the world will be back to beating the rocks together for entertainment!
Soaring fuel prices could ground United planes
As crude nears $100 a barrel, fares will be raised or capacity cut to avoid flying with empty seats.
United Airlines could ground up to 100 or more of its airplanes if soaring fuel prices ultimately cause consumers to buy fewer tickets, a top executive said Wednesday.
As crude oil prices approach $100 a barrel, Chief Financial Officer Jake Brace said there has not yet been any evidence of a falloff in demand, which has been strong since the second quarter.
But he said United, a unit of UAL Corp. (Charts, Fortune 500), and other airlines eventually will have to deal with skyrocketing prices by either raising fares further or reducing capacity rather than flying with too many empty seats.
"Either the industry passes on the higher fuel prices or we're going to have to lower capacity, but you have to make the equation work," he said in comments to a Goldman Sachs conference in New York.
I should call my older brother, who is a pilot for FedEx, and ask him if he has any inside info on what FedEx is doing to deal with the higher cost of fuel. He once told me that FedEx owns at least one refinery. _________________ About my avatar: Guess.
Posted: Wed Nov 07, 2007 7:05 pm Post subject: Re: Aviation Fuel price record
I don't see what the big deal is with fuel prices.
Why can't the airlines just increase their flight efficiency by trimming flights so the planes run fuller ie. higher load factor?
Here's an example. Take a 500 mile flight, say Buffalo to Chicago. A 757 will burn, I'm guessing, 4 gallons per mile or 2000 gallons during the flight.
So if jet fuel rises a whopping $0.50 per gallon then the flight cost rises $1000.
But the tickets will sell for at least $100. So the airline simply needs to make sure 10 of those already empty seats get filled, then it's business as usual. At $200 per ticket, that's only 5 seats.
So I would think the airline industry will adjust itself to higher prices by trimming fat, scaling down and eliminating redundancies. Few flight times, fewer choices in airlines. Not a big deal. I think the industry will adjust itself, not roll over and die as has been suggested.
Posted: Wed Nov 07, 2007 8:35 pm Post subject: Re: Aviation Fuel price record
Booking flights and getting the maximum dollars per seat is a major part of being an airline already. The people doing it know that if they can do a better job filling their planes, they will do better then their competitors. I don't think you can create a system that would load the planes more efficiently without greatly inconveniencing the passengers. I don't fly much any more but when I have, I notice that most of the planes are packed full or nearly so. They increase/decrease the number of planes for a given route as best they can now. Sometimes it is necessary to position a plane to meet an expected load later in the day. This is way you sometimes see a lightly loaded plane. Still flying. If the cancel one flight because it only has a 50% load, they might save money on that one trip, but how much do they loose because the plane and or crew is not in the proper position for future planned routes.
For maximum efficiency you would just hold the plane till every seat was filled but that would cause huge problems with scheduling for the passengers and would prevent the plane from being where it needs to be for it's next load.
Bottom line, fuel prices will continue to go up until demand is reduced. Short term I don't see much of an impact to the airlines if they pass on the costs to the passenger. The costs of driving by car are going up about the same amount as the costs of flying. Nothing will change until people decide that they are simply not going to travel. I don't believe that will happen until there is wide spread coverage of the oil situation.
According to Boeing's Web site, the 747 burns approximately 5 gallons of fuel per mile with a full passenger load with no winds. _________________ www.ChrisGeigerPhoto.com
Seems we are in uncharted territory now. Last night on my way into Richmond I sent a message to the dispatcher and asked what the current price is in Atlanta.. I work for Delta. He sent back that we are paying 2.76/gal in our main hub. This is very bad news and immediately means increased ticket prices. Long term if this keeps up it means a loss of profit in an industry which just got about as "lean and mean" as it can.
I dont know what the future holds, but the industry wont tolerate this well if it can at all. Maybe just maybe I should start thinking about writing that book.
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Sounds like they'll be in trouble in next year then. Race to the bottom, or what?
