Low Fuel Prices May Cause Airlines to Delay New Aircraft Orders

Now that oil prices have gone down, airlines may choose to delay orders on new aircraft and stick with older planes.

In Bloomberg’s Aviation Outlook 2015 (embedded below), Bloomberg Intelligence’s George Ferguson argues that as oil prices fall, airlines will slow down deliveries and fly airplanes longer. While fuel efficiency does make a difference, savings in fuel efficiencies will not make up for the cost of new aircraft.

Airlines are balancing the appeal of a new aircraft with lower priced ticket that may win them market share. “How quickly will you refresh your older fleet to get to that newer airplane at lower fuel prices? If you can save money and give that back to the passenger in a cheaper ticket price and get more people to fly your airline you might decide to take market share instead of having the newest shiniest airplane,” Ferguson said.