Published at Saturday, March 30th, 2019 - 13:04:14 PM. Type of airline. By Adelyte Möller.
A second financial issue is that of hedging oil and fuel purchases which are usually second only to labor in its relative cost to the company. However with the current high fuel prices it has become the largest cost to an airline. Legacy airlines compared with new entrants have been hit harder by rising fuel prices partly due to the running of older less fuel efficient aircraft. 44 While hedging instruments can be expensive they can easily pay for themselves many times over in periods of increasing fuel costs such as in the 2000–2005 period.
A complicating factor is that of origin-destination control ( O&D control ). Someone purchasing a ticket from Melbourne to Sydney (as an example) for A$200 is competing with someone else who wants to fly Melbourne to Los Angeles through Sydney on the same flight and who is willing to pay A$1400. Should the airline prefer the $1400 passenger or the $200 passenger plus a possible Sydney-Los Angeles passenger willing to pay $1300? Airlines have to make hundreds of thousands of similar pricing decisions daily.
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