Fuel Economics

[CAT1 REVERSION]

Now I'm no Economics Guru, or Mathematician, but with Oil prices set to rise to $200 a barrel by the end of Summer, how are the likes of Ryanair who I believe have NOT hedged their fuel going to make a profit?

At my Airline the Fuel is hedged until well into next year, so having to pay £1000 p/tonne of fuel won't cripple us....until then that is!

So, if Ryanair are taking say 100 pax to MJV and back, say 5 tonne burn each way - selling the seats for 1p (plus taxes of maybe £30), that is still only £6k, £4k short of the £10k for fuel alone, never mind airways, landing, handling fees etc.....

How can any Airline sustain this amount of loss, and more to the point, who will/is grounding aircraft and routes because of the fuel crisis.

My personal view is that there will be victims, and very soon. Oil will not stop rising until the Speculators/Brokers, US economy and governments sort themselves out. Until then airlines are going to have to 'box clever', ditch non-viable routes and keep everything crossed........

Tough times ahead....I predict $200 p/barrel by Sept!:ugh:

[Rainboe]

Trees don't grow forever. I predict a settling of the oil price back down to lower levels, though still torture. As the western economies slide into financial crisis and recession, the easing of demand will allow slack for the tiger economies to absorb extra supplies without price overreaction. Meanwhile many jobs will dissolve, sadly.

Not all tickets are 1p on Ryanair- I think they know the level of capacity they will want and the revenue they need to raise from it. I actually think the passing of the age of the cheap ticket will not be altogether regrettable- it has caused some outrageous trogs to bring their awful and embarrassing behaviour to our near neighbours. A massive era of change is upon aviation, sadly not so beneficial, but the sun will shine again. But crowing about one airline not hedging seems a bit tacky, doesn't it? By next year, it will all be academic anyway, not many airlines that hedged will be benefiting from it.

Meanwhile we will be tortured by government policy. I have just taken a 2 hour express train in Italy to Milan. Cost? Walk in: less than £6! Subway: 1Euro! Take a 2 hour express train in the UK: £100+? Even at current fuel costs, we will still find it cheaper to fly or drive than leave our cars behind and 'let the train take the strain'! There is hope for aviation still.