Originally Posted by
On eyre
Rated De - your comment re oil price in relation to airline fuel expense makes no sense. You quote USD $100 m to 300mill increase in fuel cost for USD $10 increase per barrel of crude. I would hazard a guess that the increase for some would be much less and for some much more - exactly what fleet size etc are you referring to ? And where does QF for example fit in this ?
Perhaps a percentage increase in fuel cost relative to a percentage increase in crude price might be more relevant as a rule of thumb.
And I do realise that level of fuel price hedging comes into the equation just to confuse the issue further.
valid question, responded by PM.
However, for clarification, the rule of thumb is rough and based upon International ASK for a sample of airlines.
Obviously the more exposure to a Qantas type fleet mix increases vulnerability.
Qantas, who have a treasury hedge (options mostly) on WTI/Brent crude at 80% for 12 months, Qantas would be at the upper bound of the rule of thumb.
The rising price means Jet fuel rises a bit above WTI spot (usually about $10). A falling AUD heightens their exposure.
The point of it being that a fleet decision is overdue.