Could higher fuel prices actually help U.S. airlines?

Publicly, U.S. airlines are wringing their hands about rising

fuel costs and using the continued spike in oil prices to

justify each round of fare increases and new charges for

former freebies like seat selection or checking a second

bag. Many carriers claim consolidation is the only viable

option to survive escalating operating costs. But

privately, higher oil prices may be the cause of great

jubilation in some airline board rooms. In the long run,

some U.S. airlines could benefit substantially from a

protracted fuel price crisis, and they may be some

airlines you’d least expect.


In recent years, the big six network or legacy airlines have been the most vulnerable during adverse conditions in the airline industry, but that’s no longer true in a world of $120+ per barrel oil. Most airlines, with the exception of Southwest which still has much of its fuel needs hedged this year, are affected by rising fuel costs. For a variety of reasons, low cost carriers (LCCs) are at greatest risk. Within the last few months, higher fuel costs have been a major factor in the liquidation of at least eight airlines (see accompanying chart on airline liquidation), most of which were LCCs. Frontier Airlines is also bankrupt and the current fuel crunch will likely claim more victims in the coming months.

USA Today