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Boeing Strike May Be Good News for Airlines

In case you missed it, Boeing machinists have been on strike for over a month now, and airplane delays are beginning to pile up as the plant is effectively shut down. Over the weekend, talks were adjourned without any progress. While this is clearly bad news for Boeing, it may actually end up being good news for many airlines.

The current financial crisis has accelerated the weakening of demand, but it has also made oil prices plunge down to the $70 per barrel range. While airlines previously had been doing whatever they could to ground the least fuel-efficient aircraft due to high fuel prices, that's not going to be as urgent of a problem now if oil stays on the lower side. Sure, older aircraft have higher maintenance costs, but if the price of fuel goes down, then it becomes harder to justify the cost of paying for that shiny new plane.

So, with Boeing deliveries coming to a halt, it delays the amount of new capacity entering the system at a time when replacing older aircraft might end up being a cash drain that's not worth the price of admission.

Don't get me wrong. Airlines want to have newer, more efficient aircraft, as evidenced by American's recent 787 order. But having those higher lease payments delayed for a little while isn't such a bad thing at all. Of course, that's only the case for the short term. If the strike doesn't get resolved soon, then we'll see bigger problems arise.

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