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"If fuel prices remain at a reasonably low and stable level, ofcourse it'll be favorable to operations of the company," Wang Jian,board secretary of China Eastern Airlines, told AFP. But "despite the recent reduction in oil price, it remains athistorically high levels and a significant challenge to thebusiness," said Cathay Pacific Finance Director Martin Murray. It "relieves the pressure a bit," acknowledged Air France-KLM'sPhilippe Calavia, finance director at Air France-KLM. But he noted the Franco-Dutch group has based its financial planson oil at an average of $98 a barrel this year. Oil prices are "still above over budget," he said. The price of oil continued to fall this past week, with Brent NorthSea crude for June at $106.91 a barrel in late London afternoontrade, way off the $128.40 it hit on March 1 and the record $147.50it set in July 2008. Airlines in Asia and Europe have been struggling with the highprice of fuel, the first or second largest cost in their budgets,which has pushed many deep into the red. Singapore Airlines saw its full-year profit plunge 69 percentyear-on-year to $268 million due to high oil prices and globaleconomic uncertainty. Similarly Hong Kong-based Cathay Pacific saw its 2011 net profitslump 61 percent to $708 million and recently announced a raft ofcost-cutting measures in response to high fuel prices. Australia's biggest airline Qantas, which has raised fares inrecent months to partially offset higher fuel costs, said reducedoil prices were not yet helping its bottom line. "Our fuel bill this year is going be significantly higher than lastyear, so the outlook is still very challenging as far as we areconcerned," a spokesman told AFP. Jet fuel is Qantas' biggest operational cost and in February thecarrier said it had hedged 86 percent of its remaining fuelrequirement for the financial year at a worst-case price of $121per barrel. Airlines, like many other companies, use financial instruments toprotect themselves from possible rises in oil prices. But hedgingcan also trap them if oil prices fall below expectations. "The main risk today is to rush to take advantage of currentprices, which are still very high if falling, and finding yourselfexposed to a loss on your hedges if prices continue to fall," saidAir France-KLM's Calavia. The airline which is looking at a fuel bill some 1.1 billion euros($1.4 billion) heavier than the 6.4 billion it spent in 2011, hashedged around 60 percent of its second-largest operational costafter wages. German airline Lufthansa has hedged 76 percent of its fuel needs,and forecasts it will spend 7.5 billion euros this year compared to6.3 billion in 2011. Oil prices are now moving back to a level where airlines can make aprofit, according to the industry group IATA, which represents 240companies that carry 84 percent of global traffic. "Our central forecast in March suggested that if oil averaged $115,then as a whole the industry would still make a small profit of $3billion," said IATA spokesman Chris Goater. "But if oil were to spike to an average of $135, then we would seean industry loss of $5.3 billion," he added. European airlines are also not getting their hopes up too high tooquickly as the slide in the euro has been eroding much of the gainsin the drop of dollar-priced oil. And until oil prices stabilise at a lower level airlines such asCathay Pacific, Lufthansa and Air France-KLM intend to push forwardwith drastic cost-cutting plans. The e-commerce company in China offers quality products such as China iPod LCD Screens , BlackBerry Flex Cable, and more. For more , please visit iPhone Replacement Housing today!
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