ATP Grads at Airlines

Rising Oil Prices? Airlines Are Well Positioned to Deal with it

Published Mar 21, 2011 on Pilot Jobs

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Oil prices rose above $102 a barrel on news that UN forces attacked Muammar Gaddafi forces on Monday. When asked how that price may affect the short term future of the US airlines. The airline "industry is much more smart and disciplined to deal with this rising cost of energy," David Barger, CEO of JetBlue Airways, told CNBC on Monday. JetBlue is confident that the airlines are prepared this time around with an aggressive fuel hedging program, where airlines buy fuel at low prices to use when the prices go higher. “I think we're very well positioned to really tackle oil at this price or higher," Barger said. In terms of the airline's hedging portfolio, the company entered the year with a 37 percent hedge in the first quarter, 32 percent over the course of the year, he added. "What's really been interesting is what's happened with the crack spread (purchasing oil futures and offsetting the position by selling gasoline and heating oil futures), the cost of refining here, just in the last several weeks. So that's a little bit of non-linkage to our strategy but again we are handling it quite well," Barger said. “The industry is seeing a stronger economy year-over-year across the US, with considerable discipline in capacity growth in 2011 versus 2010,” he said. "When you take capacity along with the economy and then you start to take a look at the cost of oil, I think there still be a very rational pricing environment across the industry. But it's fair to say I think the consumers are also sharing in the cost of higher oil at the pumps if you will into airlines," Barger concluded.

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