Fun with numbers: airline fuel costs and ticket prices to Disney World.....

[ualdriver]

So crude oil keeps going up and up. Just to kind of get a feel for how this will influence my airline's costs, I played with some numbers from United's latest 10Q just to make some very rough estimates:

Fuel costs for UAL, to Sept 30, 2007: 3.5B
extrapolated out for the whole year: 4.6B

Total UAL expenses for UAL, to Sept 30, 2007: 14B
extrapolated out for the whole year: 18.7B

Fuel is about 25% of UAL's total costs.

So what if.......UAL's average fuel costs for 2008 are 50% HIGHER than the average they've paid so far for the months ending Sept 30,2007 (all other expenses stay the same for the sake of illustrating what significantly higher fuel costs (50% higher on average) will have on the price of our tickets).

2008: estimated new fuel costs 6.9B (up 50% over 2007 average)
2008: estimated new total expenses 21B

Fuel is now 33% of costs in this scenario

How much (roughly) does UAL have to charge in 2008 to cover a 50% increase in fuel costs next year: a "whopping" 12% more!!!!

 

[skywdriver]

but think of all the money the company can save in the next contract negotiation by threatening to park 100 airplanes! what a joke, those guys are idiots. they are saying that by fuel increasing a couple of more dollars a barrel that they can't keep revenues up enough to justify the airplanes? what about that 306 million net for the last quarter? interesting numbers by the way, maybe you should do the execs a favor and send them an email with that information, seems that they are a bit up to their necks in propaganda.

 

[ualdriver]

but think of all the money the company can save in the next contract negotiation by threatening to park 100 airplanes! what a joke, those guys are idiots. they are saying that by fuel increasing a couple of more dollars a barrel that they can't keep revenues up enough to justify the airplanes? what about that 306 million net for the last quarter? interesting numbers by the way, maybe you should do the execs a favor and send them an email with that information, seems that they are a bit up to their necks in propaganda.

Well, I think that whole quote by Brace was taken out of context. What he said was that IF fuel prices continue to go up and IF the airlines could not cover this increasing cost by raising fares THEN it is possible to remove aircraft from the market as we have some aircraft that are paid off or coming off lease that could be taken out of the system without penalty. If the airline industry got themselves into that situation, I suspect we wouldn't be the only airline removing capacity.