Originally Posted by
Beagle
As mentioned yesterday, yield and fuel prices are inextricably linked. Let me unpack that a bit for those that don't know. Lots of foreign carriers don't hedge at all. For example, many Chinese owned airlines are forbidden to hedge, lets face it the cost of hedging is quite high. As fuel moves higher the intensity of competitive airfares slackens off and net yield increases.
I have maintained for quite some time that AIR is more competitive with its modern fuel efficient fleet when Oil is $70 than when it is dramatically cheaper than that as some long established airlines like Qantas for example are still flying a lot of older fuel hungry but less capital intensive planes around. QAN will get hurt from this far more than AIR who will shortly have 11, (count em) really fuel efficient Dreamliner aircraft flying. If oil stay's where it is I expect yield to go up about 2-3% over time which on over $4 billion of passenger sales recovers the extra fuel costs and the hedging gains will be cream on top of that !