Airlines embrace oil decline, but no time to party

CHICAGO/WASHINGTON (Reuters) – A 23 percent drop in oil prices since mid-July brightens the outlook for troubled airlines, but clouds remain thick over the industry, with little hope that carriers will scale back downsizing plans or repeal unpopular fees.

The U.S. airline industry has fallen on hard times, as rising fuel prices have far outpaced a series of fare hikes that began in 2006. Economic weakness, meanwhile, threatens to erode demand and rob carriers of the pricing power they reclaimed in the wake of a low-fare war with newer, leaner airlines.

But carriers are fighting back with massive reductions in capacity and staff. And some of the gloomy talk from airline experts has turned positive in the last month since crude oil retreated from a record high just above $147 a barrel to a three-month low of $112.87 on Tuesday.

Reuters