For Tony Fernandes, CEO of AirAsia, the recent fall in the price of oil was an early Christmas present. By the end of the day last week that the airline boss had taken to twitter to express his delight, the price of Brent crude had fallen further to $69.78 a barrel, its lowest price in four years.
Fernandes’ enthusiasm can be easily understood. Airlines spend more than 30 per cent of their operating costs on fuel: the oil price fall means higher profits for the industry, which can now lower fares to attract more customers.
Stock market investors have also been buoyant toward airlines. US airlines have seen their stocks surge over the past two months, while China’s three largest airline companies gained over 10% last week. Meanwhile, airlines in the Asia-Pacific have been reported to be waiting for oil prices to fall more before “hedging” their fuel needs for the next year in an attempt to capitalise on the price slide.
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