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Thursday, July 24, 2008

Fuel and Airlines: The Tail that Wags the Dog?

Between 2001-2005, airline fuel consumption led the price of fuel by around 3 months (see below) in a classic case of demand driving the price. Since mid-2005 this relationship has broken down and over the past six months or so the two have diverged with the cost of fuel rallying ~60% YoY.

I expect the relationship to re-emerge and I suspect it won't be due to an increase in consumption.
Source: BTS