Falling fuel prices

As the price of crude oil keeps dropping, you may be wondering what that means for an industry focused on bringing newer, more fuel-efficient airplanes to the market. Here are a few thoughts on how I see the issue.

An airplane is a 20 year plus investment. We believe efficiency and capability will always drive market demand— regardless of where fuel prices trend to over the long term.

Case in point, the 787. We closed the business case and launched the airplane when oil was at $40 a barrel.

And between 2005-2007, when oil averaged $60 a barrel, we booked more than 3,000 commercial airplane orders.

As we talk with our customers, we aren’t seeing any desire to change fleet plans due to the drop in oil prices. IATA is out with new figures showing that airlines are more profitable—which means they can grow in new areas with a larger fleet.

Even in a low price fuel environment, it’s hard to argue that 15 to 20 percent better fuel efficiency isn’t a good thing. And that’s exactly what our products offer.

Comments (2)

V V (Montréal, Québec):

I am more concerned by the falling value of local currencies in Asia and other parts of the world than by the falling fuel prices.

If this continues, something really nasty will happen to the economy in South-East Asia, in China, in India and other places where air transport was supposed to be growing fast.

I have the very strange feeling that crisis will happen in many parts of the world earlier than many people think.

Andrew Boydston (Boise, ID USA):

It comes back as a economy of scale type of analysis with the fuel prices function. An Airplane ordered today will, likely deliver an average up to five years into the future. The average fuel cost graph slope, when making a fuel cost projection will validate ordering the more efficient model per passenger seat even during the roller coaster fuel price drops. Travel demand will incerease during the next 24 months because fuel price drops, inspiring the need for additional equipment or making an opportunity for upgrading and expanding the airline fleet.

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