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]

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:mad:

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]

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.

[NickN]

If the majority of the worlds economies continue their decline toward recession, demand and hence prices may not jump back up for a number of years. If that is the case hopefully airlines will complete their fleet upgrades and other cost cutting measures in relative comfort without the added pressure of high fuel prices.

As for V Australia seeing a decline in passenger numbers due to the weak aussie dollar and US financial woes, I still think there is a strong demand for flights to the US that will continue to grow.

[Montague S]

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.

could be back up sooner if OPEC nations decide to cut output.

[Rhys Xanthis]

The price of OPEC basket of thirteen crudes stood at 68.58 dollars a barrel on Wednesday 15/10/08, compared with $73.49 the previous day, according to OPEC Secretariat calculations.


The Organization is concerned about the deteriorating economic conditions with contagion risks. The subprime mortgage problems that have been observed for a long time have created a shock wave in financial institutions resulting in huge losses, and escalating credit squeeze which has turned into a deep financial crisis. The continuing turmoil in the financial market has spread to many regions and created even more uncertainties for the world economy.

Amid growing unease over this situation, the Organization of Petroleum Exporting Countries has decided to hold an Extraordinary Meeting of the Conference on Tuesday, 18 November 2008, in Vienna to discuss the global financial crisis, the world economic situation and the impacts on the oil market.

The Organization reiterates its determination to ensure that oil market fundamentals are kept in balance and market stability is maintained.

One would suggest that at that meeting production will be cut if oil remains at current (and still falling) prices.

[Adam T]

I was talking to a friend of mine last week and he said that OPEC are due to meet again shortly and one of the things on the agenda is reducing production which in turn will jump the cost back over $100 a barrel.

I don't know how reliable this information is but if it's true I doubt we'll see any relief.

[Radi K]

No relief because the AUD is so low.

[Rhys Xanthis]

No relief because the AUD is so low.

Yeah, very lame for those planning overseas trips:(

[Mike Scott]

But very good for those of us living overseas and sending US$ back home...gotta do something to offset the thrashing our 401k (super)funds are taking in the market. I'd be happy to see the A$ back at .50 (being selfish)

MS

[Montague S]

http://www.abc.net.au/news/stories/2008/10/24/2400966.htm?section=justin

just as predicted, OPEC cuts output.

[Marty H]

Finally seen some relief at the pump this week with 10cpl slashed off.

Think airlines with hedged fuel into next year are going to have some interesting bargining with suppliers on price.

[Marty H]

http://www.news.com.au/business/story/0,27753,24549827-31037,00.html

Despite to OPEC cut to production it didnt stop oil prices dropping.

[Saj_A]

Its going to time for the cutbacks to kick in (http://www.fleetbuzzeditorial.com/2008/10/24/risk-oil-orders/).

In a weeks time, we'll see that price rise towards triple-digits again.

Not nice, however, the industry needs a few major casualties to further drive forward efficiency and lower operational costs (hence lower ticket prices).

The likes of the ridiculous United Airlines/US Airways this week reported shocking Q3 losses largely down to their inability to hedge fuel contracts properly.

For that reason alone these two carriers should be amongst the first to die. :D

[Rhys Xanthis]

Look at the dollar at the moment...be prepared for some serious price hikes.