labbats
Zulu who?
- Joined
- May 25, 2003
- Posts
- 2,593
Lower fuel prices are 'white knight' for airlines
Falling fuel prices are "acting as white knight" for the airline industry, The Wall Street Journal (subscription required) writes. So, how much is the drop in fuel costs helping the airlines? At American Airlines, each $1 drop in the price of a barrel of oil shaves about $80 million from fuel costs, according to the Journal. For the year, AA's new estimates on fuel costs indicate the carrier could save about $475 million during the second half of the year. But, in an interesting twist, the Journal writes that "some airlines stand to gain more than others from lower fuel prices." Airlines with big hedges likely won't have as much to gain. United, for example, locked in 28% off its third-quarter fuels costs at $69.84 per barrel of oil. "That seemed like a good price when oil was soaring above $70, but with recent price drops to $60, United is losing money on at least some of those hedges," the Journal writes. However, United says any hedging loss is "dwarfed" by the amount the airline will save on falling prices for its non-hedged fuel costs. The Journal says other airlines likely to "lose at least some money" on fuel hedges are Northwest, US Airways, JetBlue, Continental and Delta.