Fallout: The Financial Crisis

Lower oil prices don’t inspire airlines

Rachel Dornhelm Oct 16, 2008
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Fallout: The Financial Crisis

Lower oil prices don’t inspire airlines

Rachel Dornhelm Oct 16, 2008
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TEXT OF STORY

Scott Jagow: The airlines are certainly thinking merger, although we haven’t seen too many deals so far. You’d think with oil prices plummeting, the airlines might be in much better shape, but they are still the airlines after all. Rachel Dornhelm has more.


Rachel Dornhelm: Oil prices half of what they were three months ago? You’d think executives in the fuel-dependent airline sector would be pulling out the drinks cart to celebrate.

But aviation business professor Richard Gritta says you’ve got to put it in perspective:

Richard Gritta: And the price of aviation fuel, which was over $4, is still not down to what it was in the heyday of the airlines in the mid- and late 1990’s, when it was about 61 cents.

Of course the Boeing 747 in the room is the economy.

George Novak with Innova Aviation Consulting says, yes, any lower fuel costs are good news.

George Novak: However at the same time, these air carriers are facing diminishing demand in a recessed economy, so it’s really just a symptom of a greater problem in the economy and something that will greatly affect air carriers.

Novak says airlines use models to lock in the lowest fuel prices to meet their future needs. But he says with all the uncertainty in the markets, those models are as confused as everybody else.

I’m Rachel Dornhelm for Marketplace.

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