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Airlines could see more benefits from falling oil demand
By Christopher Hinton
Last update: 3:07 p.m. EDT March 12, 2009
NEW YORK (MarketWatch) -- Falling oil prices have drastically reduced costs for airlines and have helped offset the loss of revenue from falling traffic demand, but the industry is now about to extract another fuel-cost benefit, according to a Thursday note from FTN Midwest analyst Mike Derchin. Crack spreads, or the difference between the price of oil and jet fuel, have narrowed considerably since last year's average of $25.50, Derchin said. That average fell to $21 in January, $15 in February and $6 in March. "Every $1 per barrel change [in the crack spread] is equal to close to $400 million annually," Derchin said. "If crack spreads end up averaging $10 less than last year, i.e., $15 per barrel, the airlines would save close to another $4 billion annually."
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By Christopher Hinton
Last update: 3:07 p.m. EDT March 12, 2009
NEW YORK (MarketWatch) -- Falling oil prices have drastically reduced costs for airlines and have helped offset the loss of revenue from falling traffic demand, but the industry is now about to extract another fuel-cost benefit, according to a Thursday note from FTN Midwest analyst Mike Derchin. Crack spreads, or the difference between the price of oil and jet fuel, have narrowed considerably since last year's average of $25.50, Derchin said. That average fell to $21 in January, $15 in February and $6 in March. "Every $1 per barrel change [in the crack spread] is equal to close to $400 million annually," Derchin said. "If crack spreads end up averaging $10 less than last year, i.e., $15 per barrel, the airlines would save close to another $4 billion annually."
