Delta Says Fuel Savings Can Offset 20 Percent Drop in Traffic

(MoneyWatch)  We've talked a lot about how the tremendous drop in the price of fuel can help airlines to weather a drop in demand. This week, Delta President Ed Bastian put it in perspective, and we're talking huge numbers.

Bastian noted that if oil stays at $50 a barrel through next year, the airline will save $5 billion in costs for 2009. I assume he's talking about the combined Delta/Northwest entity which, for the first nine months of this year paid just around $3 billion more for fuel than it did in 2007. Let me put it this way, excluding goodwill, the combined airline lost less than $1 billion for the first nine months of this year. That $5 billion benefit could go a long way.

The size of the benefit was confirmed when Bastian admitted that it would take a 20 percent drop in passenger revenue to offset the drop in the cost of fuel. There's still a long way to go before we see anything like that.