Originally Posted by
FNGFO
We’ve not been as successful as we could have been with oil at that price point. Or do you think BS like AA’s foolery with the E island, fare matching and gate limiting at DFW would go on if their fuel prices were 20-30% higher than they’ve been for the last half decade? Give them $100+ per barrel oil and the price differential becomes stark in a ULCC’s favor.
Cheaper oils benefits everybody, specially ULCCs. The cheaper the fuel, the wider the total cost advantage gap between us and the legacies. The more expensive the gas, less control we have over the total operating cost given the larger gas % share.
If traffic demands recovers quickly enough, we might be able to take huge advantages of this oil price war. Heck, we might even start hedging, I know I would.
Having said all that, there’s always going to be demand for ULCCs (taking covid19 and such extremes apart). In strong economies we stimulate first time flyers “creating” market traffic. In recessions, leisure premium travelers “step down” to fly cheaper. And lastly, don’t forget about independent business travelers that today might represent a very small % but will slowly grow as we add frequencies.