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On the downturn thread many people appeared with bullish and positive views and the debate ensued. On the Upturn thread the same thing is happening. Both Upturn and Downturn threads are discussions about the wider economic envirnoment in which commercial aviation lives. You can be a Bull or a Bear on either thread - that's fine.
I'll stop worrying about oil prices once they've spent 6 months below $70 a barrel - until then they are at record prices outside of the design limits of most business models. One test detonation will be all that is required to soar past the recent high..
The oil price is a marginal issue. The real issue is recession and the number of passenger miles declining AT ANY ticket price. This is the real issue. The marginal cost implications of kerosene in wing tanks would be no problem if the economy were booming or just doing well. After all, the average easyJet fare is £46. When Gordon Brown invented £10 Airport Duty Tax out of thin air it had the same effect then that a doubling of oil prices would have had. In that year easyJet profits rose, load factor increased and they added 15 additional aircraft.
Its not oil. Its the House Price Crash leading to Recession that is the issue.
Location: Just a bit lower than the point where the falling angel meets the rising ape
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A falling oil price is indeed welcome, and will doubtless have knock-on effects in many areas, hopefully the cost of food and merely getting to one's job for a reasonable price.
Dunno if this is going to be enough to encourage the average punter to keep on spending his cash on unnecessaries though. And therein lies the rub.
Oil price - it's August - oil generally drops towards the end of the peak demand season (barring tropical storms).
I'm not going to stop being concerned about the oil price until:
- the oil futures market ends contango and returns to backwardation (Nymex) or
- at least 2 or 3 out of the 5 major oil producing regions of the world increase production (BP statistical review of world energy)
Largely as production is limited by trouble in Nigeria, and nobody wants the heavy crude that Saudi Arabia produces. Increasing light, sweet crude production would help a great deal...and increase our oil dependency...raising demand further.
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I'm not going to stop being concerned about the oil price until:
- the oil futures market ends contango and returns to backwardation
Todays good news however is that the oil price continues to decline and that expert opinion now appears to suggest sub $100 per barrel by year end.
Would these be the same "experts" who were predicting $200/barrel before the year was out? A few weeks ago nobody thought it had any chance of dropping, and then when it did we saw what effect the Iranian missile test had.
I wouldn't count on it being below $100/barrel by the end of the year. It's hard enough to predict what it's going to be this time next week, never mind 5 months' time.
Having been through a few upturns and downturns, I would say now is the time to start your course, preferably integrated, and be top of the heap when the upturn comes.
Stand by for WWW to explode!!
I would say now is the time to start your course, preferably integrated
Cor blimey!
100% DO NOT go intergrated...
See what this winter holds...that's when airlines traditionally make a loss...some may not be able to sustain the operating costs...things are changing week by week, financially and commercially...
__________________ Regards JB007!
Flight Ops,Crewing and Dispatch Moderator
The oil price is a marginal issue. The real issue is recession and the number of passenger miles declining AT ANY ticket price. This is the real issue. The marginal cost implications of kerosene in wing tanks would be no problem if the economy were booming or just doing well. After all, the average easyJet fare is £46. When Gordon Brown invented £10 Airport Duty Tax out of thin air it had the same effect then that a doubling of oil prices would have had. In that year easyJet profits rose, load factor increased and they added 15 additional aircraft.
Its not oil. Its the House Price Crash leading to Recession that is the issue.
Bullshit. The real issue has been oil rocketing to $147. That single factor wiped out ryanairs massive profits and caused airlines around the world to go bust. It also caused major US carriers to downsize capacity.
You should be thanking your lucky stars that oil spiked like it has done, because if it hadnt your doom and gloom predictions would be looking pretty stupid at this point. For example Aer Lingus just posted record passenger numbers for July, for the first time in the airlines 72 year history they passed the 1 million monthly passanger mark. The likes of EZ and Ryanair have also reported record numbers. Without the oil crisis airlines would be doing ok. 'The worst conditions in aviation history' has been mainly caused by a massive increase in operating costs, not by reduced passanger numbers.
Mark it is arguably as a result of a large number of things... credit crunch, oil price etc etc.
The end result is the same.... the number of airlines that don't have a recruitement ban in place is dwindling rapidly. IF we go into the recession that some people have been flagging since the creidt crunch hit 12 months ago I hate to tell you but your "you were right for the wrong reasons" arguement will sound hollow to those wannabees without a job and £50-100k of debt.
You also seem to be ignoring the comments management teams at airlines are making about the outlook (Ryanair just last week were saying how they expect passenger yields to gap down). It is these management teams that make decisions about recruitment..... ignore WWW and other if you please..... but ignore what the airlines are saying at your peril
I was made redundent during the last downturn. Two weeks later I got a call, "do you want your job back, can you start tomorrow?"
You just never know.
In the Telegraph to day one xpert said oil will be $200 a barrel while in the same paper another said it would be $70. Truth is I dont think anybody knows whats going to happen.
Sometimes you just have to be optimistic and take a chance.
I would argue that the whole credit crunch is as a result of rising oil prices. The first suburbs of cities in the US that experienced large drops in home prices were the most sprawly ones furthest from the downtown core. The same trend applies to whole cities. Mortgages defaulted and bad debts rose, thus causing the credit crunch.
Anyone who thinks that "high oil price = credit crunch = global downturn" needs to take a lesson in economics. I don't particularly endorse the manner in which the four horsemen of the apocalypse have ridden into this thread, but their description of how things have happened is accurate.
Sometimes you just have to be optimistic and take a chance.
True, but when that "chance" involves six figures of debt, your parents' house on the line and what many airline CEOs say are the worst market conditions the industry has ever seen, it's a bit harder to be so optimistic.
Everyone is entitled to their opinion; mine is that it'd be foolish to stake so much on an integrated course right now. If integrated is for you, give it a year or so and see how things pan out in the industry.
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Originally Posted by v6g
I would argue that the whole credit crunch is as a result of rising oil prices.
The oil price only really started to rocket seriously 9-10 months ago. The first signs of the impending "credit crunch", with all the stuff about the US sub-prime lending etc. happened quite a while before that. I know little about economics but I would argue that the oil price has been an unfortunate side effect of weak markets and weak currencies. Even if the oil price stabilises between $115-120, as it seems to be doing, the financial markets and the economy are still in bother. So what WWW says about house price crash = recession = far fewer people flying will probably turn out to be true. I hope it doesn't, but it probably will.
Grass strip - believe me im not ignoring the threat of a looming recession, and of course people having less money will = less passengers. Im just pointing out that main factor that has really hurt the airlines SO FAR in this current crisis is oil prices, not the credit crunch/recession.
To the guy who thinks oil caused the credit crisis, that is not the case at all. If anything the credit crisis has contributed to higher oil prices, as the dollar lost value investors stopped buying dollars and bought commodities instead as a hedge. Thus as the euro loses value and the dollar gains, the price of oil has dropped in recent weeks (just one of the reasons its dropped).
What caused the credit crisis? Risky US consumers defaulting on their mortgages.
So what caused them to default on these loans? Well, the mortgages resetting to higher interest rates is one cause. But, the distribution of risky loans is uniform across American cities & neighborhoods. What was not uniformly distributed across neighborhoods was where the foreclosures began and where the steepest declines have taken place. The outer fringes of the exurbs were where the trouble started, then the suburbs - I wonder why? Far steeper declines have also been observed in the more sprawly US cities with little to no transit whereas areas close to central urban cores and cities with extensive transit have registered much lighter declines.
The oil price rise has been a gradual rise over the last several years, not a sudden 9-10 month thing. I'm not saying that the oil price is solely to blame for the current crisis but it's played a greater role than many people seem to believe. Risky mortgagors would have defaulted either way, but a major first trigger and the accelerant was the oil price.
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