pinniped

WN increasing capacity would be good for (U.S.) fliers. I'd be happy with that. They are the primary carrier that has the size and scale to actually compete with the legacies, if they so choose. If they increase capacity and force a few more domestic routes to behave like competitive markets instead of monopolies or duopolies, I'd welcome that. They'd benefit us even if we never set foot on a Southwest plane.

iahphx

No one (at least who's talking) knows for sure, but after following this industry closely (like every day) for more than 2 decades, I'm pretty darn sure that the actions of speculators in New York and London are 10x more influential in setting the price of oil than Riyadh is. Just look at the market spikes and collapses since 2000. None of them were triggered by the Saudis: all of them originated on Wall Street. This is not surprising, given that the vast majority of oil traded in the world is on paper, not in "real world" oil.

If (in a fantasy world) paper oil was not allowed to be speculated upon, the price would be way less volatile -- in other words, it would be priced like most other things we buy in this world.

I'm 99% sure that extended sub-$50 oil will eventually result in lower airline ticket prices. Trees don't grow to the sky, and even oligopolies have to react to changing market conditions. I'm not really expecting Southwest to revert to their cheapo fares -- their costs are now too high to do that -- but every airline has some incentive to increase capacity when its costs are lower. Collectively, this will add meaningful new capacity. More significantly, the ultra low cost carriers have every incentive to add new flights if the majors insist on charging sky-high fares. Oil is a higher percentage of total cost for a low fare airline than a high fare airline (due to lower wage costs), so this is arguably a "bigger deal" for them. If I'm an upstart business and my now lower costs enable me to significantly under-cut existing pricing, I'm going to be expanding faster. It's a no-brainer.

How fast this happens, and to what extent, we don't really know. I'm thinking we won't start seeing meaningful changes until at least next fall, assuming oil prices remain low.

Cloudship

If they keep low what you are going to see are a few more startups trying to take advantage of the situation.

iahphx

It's really hard to do a viable USA airline start-up. If current trends continue, I do think somebody will try, but the more probable relief will come from expansion by the existing low fare airlines.

Cloudship

I doubt any of them are going to be viable, but that wont stop a lot of people...

pinniped

I think United should spin off a low fare carrier-within-a-carrier. They could make it all cute and stuff...talk to the passengers like we're 8-year-olds.

It'll be a huge hit, guaranteed. @:-)

LondonElite

I thought United is a low-fare carrier...

LondonElite

Interesting reading some of the predictions here one year on!

ft101

Yes. From page one (October 2014):

And the graph since then:

http://www.nasdaq.com/markets/crude-...?timeframe=18m

pitz

The bigger problem is that the economy had to go into recession, if not depression, to drop the fuel prices so much, so quickly. So while the planes are cheaper to fuel, people generally don't have a lot of money to actually fly on them. That's why you're seeing the mileage run forum being deluged by cheap fares far in excess of even the sort of discounts implied by fuel prices shedding 60%. Fuel is typically 30-40% of overall costs, and fares are down far more than that in many cases.