Naturally you might think increasing oil prices would have a negative effect on airlines. The rise in oil price directly impacts the price of air tickets. However, that may not be the case at all.

According to Hunter Keay, Managing Director of Airlines, Aerospace & Defense at Wolfe Research, it’s not about the profit, it’s about how the airlines make the profit. Thanks to increasing oil prices, airlines will turn to capacity disciplines and fundamental behaviors to control their costs. Pricing power is dictated by capacity control. As seen in the past, this has proven true.

Past results prove to be good

In the past, when fuel costs were high, airlines were forced to practice judicious capacity restraint to maintain a healthy supply-demand balance. The combination of adding more seats and cutting unprofitable routes made it less likely that carriers had an excess of empty seats. For a common traveler this also means potentially running into less barriers with overbooking.

So this is a good thing! Instead of being concerned about high ticket prices, you may find an improvement in your travels. Keay believes that when fuel becomes “too cheap”, airlines create a better supply-demand. Most of the production increase will come from countries outside Opec, led by explosive growth from frackers in the United States, with China and India leading the increase in demand.

Airlines are the fastest growing user of oil

The world’s airlines will be the single fastest growing user of oil, increasing consumption by 2.2% a year on average, to 2040. However, the largest absolute growth is expected to come from road transport. Airlines even beat out the growth of electric cars. “The world is better off when borders are open to people and to trade,” IATA CEO Alexandre de Juniac said in a statement.

According to IATA, North America remains the most profitable region for air travel, followed by Europe and then Asia. There’s never been a better time to start a career as an airline pilot. If you’re considering a career in aviation don’t forget to take a look at Baymac. Baymac offers extraordinary services for aviation professionals. Our plans are created specifically for the unique lifestyle created by the industry. Create your free account now to find out more.