What's the future for the airline industry?
Airline stocks have been severely beaten up in the past months, mostly as a result of rising fuel costs. But what of the industry from a long-term perspective?
Can airlines continue to operate as we know them if oil remains so expensive? Will we see consolidation amongst carriers? Will the world just have to fly less often? (Perhaps businesses will start to use videoconferencing more instead of face-to-face meetings?)
What does all this mean for the airline related stocks? I personally cannot imagine a world where high fuel costs mean that people are no longer able to fly. Captialism always seems to find a way - so perhaps companies seeking fuel efficiencies, or new means of powering aircraft are the ones set to benefit?
What about the aircraft manufacturers? How will this affect aircraft sales? Will the Airbus design of much larger aircraft, flying hub-to-hub prove more feasible than Boeing's smaller Dreamliner given fuel costs? How will GE's engine sales be affected?
Answers
3943 points
MNSL answered one year ago …
High oil prices have caused enormous losses among airlines in the United States and other conutries.
Higher oil prices will force Airlines to:
Seek bankruptcy protection
Cut capacity and look for mergers
shut down routes that are not operating with near-full planes
will cut the number of services they offers
Higher oil prices will drive up operating cost and it will be very bad for Airlines.
There will be demand for low cost model, fuel efficiency model and small air planes
However Boeing expects oil bubble to burst in global slowdown. They expect the price of oil to fall back to a long-term average of between US$70 and US$80 a barrel.
Airlines will replace their jet fleets - totaling 18,000 aircraft worldwide - with more fuel-efficient models.
Boeing has a backlog of aircraft orders worth US$250 billion. Most orders were from Asia Pacific, especially China.
In the long run best managed airlines with efficient cost control systems will survive.
If oil price fall back to US$ 70 and US$80 then we can see strong rally in Airlines stocks worldwide.
