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flyover · March 20th, 2005, 18:46

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LCC's are really only able to do it today because of fuel hedging. Now once the hedging starts running dry, then things get real interesting.

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Pretty wishful thinking. The only LCC that can hedge to any significant extent is SWA because of their credit rating. Even with no hedging the LCCs have a significant cost advantage. Even if they slipped into the red because fuel prices stay high, that will be mitigated by the inevitable drop in capacity as some of the legacies finally start to expire. When that happens the LCCs will be the first back into the black again. In the near term they are in a comfortable position. Longer term, at least a few years out, they will have stiff competition.

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Paradigm shifts, new realities, "the market has changed forever (for like the hundreth time in the last decade)" are all catchphrases spouted by analysts that don't what the *expletive* they're talking about.

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It will be a different industry in a few years, not recognizable from pre-2001, if only by the number of missing airlines.

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It's the price of fuel. Period.

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Even if it were just the price of fuel and not too many hubs the result is the same. Some hub competition has to leave the market before the remaining competitors can sell tickets above cost. As you point out there isn't likely to be any salvation from lower oil prices.

March 20th, 2005, 18:46	#30
flyover Old Skool Join Date: Mar 2004 Location: Georgia Posts: 3,389	Re: CONTINENTAL WARNS OF FURLOUGHS..... [ QUOTE ] LCC's are really only able to do it today because of fuel hedging. Now once the hedging starts running dry, then things get real interesting. [/ QUOTE ] Pretty wishful thinking. The only LCC that can hedge to any significant extent is SWA because of their credit rating. Even with no hedging the LCCs have a significant cost advantage. Even if they slipped into the red because fuel prices stay high, that will be mitigated by the inevitable drop in capacity as some of the legacies finally start to expire. When that happens the LCCs will be the first back into the black again. In the near term they are in a comfortable position. Longer term, at least a few years out, they will have stiff competition. [ QUOTE ] Paradigm shifts, new realities, "the market has changed forever (for like the hundreth time in the last decade)" are all catchphrases spouted by analysts that don't what the expletive they're talking about. [/ QUOTE ] It will be a different industry in a few years, not recognizable from pre-2001, if only by the number of missing airlines. [ QUOTE ] It's the price of fuel. Period. [/ QUOTE ] Even if it were just the price of fuel and not too many hubs the result is the same. Some hub competition has to leave the market before the remaining competitors can sell tickets above cost. As you point out there isn't likely to be any salvation from lower oil prices.