Originally Posted by mightymousetech
Originally Posted by Mr Nice
Expect a crazy amount of layoffs in this industry.
Low gas prices are good for consumers, very bad if you're employed in this industry.
Will be very good for airline stocks.
On the surface, you would think so, but with revenue down 95%, and only 30% of the cost of running an airline being fuel, it's not going to do much to stop the hemorrhage of cash ($100 million/day for each of the big airlines...that's EACH...take a $45 Billlion/year company like Delta or Southwest, now take away nearly all of the revenue...and keep most of the costs...it's some ugly arithmetic).
When things like aircraft leases, gate leases, and employees are 65% of costs, and they're basically fixed costs (though employees are working reduced hours, so the cost is down a bit) the cash burn isn't decreased much by lower fuel costs.
They're flying anywhere from 20 - 40% of their normal flights, too, so the fuel burned isn't nearly as much as usual...and the savings aren't as much as they could be either...
When the traffic comes back (which I hope to be this year, and not much longer) then the fuel burn will go up and lower prices for fuel will help the airlines manage cost.
Unfortunately, the traffic coming back will be the result of a return to of economic normalcy, and I expect oil prices will lead, not lag, that return...