Originally Posted by
Propellerhead
BA hedge their fuel a lot more than US airlines, so it won’t be biting yet. Obviously if it becomes a full blown energy crisis long term then who knows. The Middle East is not a big market for BA compared to the USA, India etc. They’ve never been able to compete with the Middle East carriers anyway with their low cost base and government subsidies. And now there is a lot less competition on routes to India, Far East etc. There are potential opportunities for BA in this - if only they had enough aircraft, crews and slots. And the Far East routes are expensive to operate due to airspace restrictions - 3 crew now 4 crew and a lot more fuel. While the Chinese airlines go a direct route through Russia.
of course there’s a chance this all dies down in the coming weeks, but with every passing day and every escalation the chances of this ending in disaster for the airlines increases.
Even with significant hedging, profits could easily be wiped out in the next 12 months at $120 a barrel. And with $200 a barrel I think you’ll start to see planes being parked up. Don’t forget that 50% of Europe’s jet fuel comes through the straight, it’s no good having hedged your fuel if the bowsers run dry. Also, the general public are already struggling with the cost of living. A surge in inflation will reduce demand at the same time costs increase.
The airlines have to keep behaving as if this will all just go away, but if it doesn’t I wouldn’t want to be at the bottom of the BA MSL, or working my notice for my current employer.