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How Cheap Oil Could Become a Real Problem for Airlines

How Cheap Oil Could Become a Real Problem for Airlines
Photograph by Mark Elias/Bloomberg

Oil futures have been on a torrid plunge in recent weeks, touching lows below $80 per barrel. Great news for airlines, right? Maybe not.

For roughly the past 35 years, inexpensive jet fuel has routinely served as a siren call to airline executives. Cheap fuel spurs more flights and wild grabs for whatever business looks attainable in the travel market. Marginal routes become profitable with lower fuel prices, which, in turn, bolsters the argument that new flights can boost revenues with little cost. Cheap fuel also lets an airline experiment more radically with flight schedules in the bid to swipe market share from rivals.