Quote:
Originally Posted by strandinthewind
^^^
I agree.
And, the price of fuel is the no. 1. thing ruining the airlines now. And, fuel likely will only get more expensive. So, either the formerly $200 or so flight from Chicago to Manhattan will have to go to $300 or so soon on all airlines. Or, they will go broke and be foreced to cut dangerously into seemingly uncutable areas. I mean there are only so many $25 extras the public will pay for  |
As you know my background is in the oil industry but even I can see the profiteering going on.
Actually I don't see the oil price as being the issue per se, but rather the way in which airlines (except BA/Virgin) buy fuel. I once explained in a thread that organisations bid for oil and buy it in advance. That way they get a better deal and can budget effectively. BA/Virgin hold about 9 months supply at any time. The issue with American airlines is that they buy kerosine daily at market rate and they do so because at some stage they worked out that the few dollars they might lose when the sale price changes is offset by the huge cost they would have had to pay to store the fuel. Makes sense if the movement in the oil price is $10 per year. But when the change is $40 they are stuck paying premium rates and two problems occur. The first is that they can't 'lay' the costs off quickly enough - they may have booked seats for months to come. Secondly they don't have the infrastructure to store fuel purchased at a cheap price.
The short term outlook is that the only way to balance the books is to send out 'full' planes and that means reducing schedules/fights.