JET FUEL ARBITRAGE

摘要

Airlines have a simple business model, summarized as "planes in the sky, [posteriors] in the seats." Theirs is a derived demand, a fancy way of saying passengers tolerate a really dreadful experience as a cost of arriving at their destination. An empty seat is a revenue opportunity permanently foregone, so carriers are willing to sell them below their marginal cost of operations as any revenue is better than none. If you add truculent labor unions, the vagaries of weather and economic factors and the always variable cost of jet fuel (our topic here today) small wonder Warren Buffett once quipped, "Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."