Lately, I’ve been hearing a lot of news about the airline companies. CNBC had a guest the other day who was telling viewers to buy. His basis was the low price of oil has reduced costs for the companies and has helped their bottom line. True, oil is very inexpensive compared to six months ago! However, I’m not sure if the reduction in oil price is the prevailing variable.

First, let me say, I’m not very knowledgeable about the airline companies. I welcome feedback and ideas relating to this subject. Personally, I feel the low cost of oil will help the airlines reduce costs. However, I believe the lower costs of oil can also hurt the airlines. With lower oil prices, we’ve seen a drastic drop in fuel prices. This means it is cheaper for road trips. I take a yearly trip to Tucson, Arizona. Before 2006 I always drove the 950 miles, but in 07 and 08 I flew because the cost of driving outweighed the cost of flying and renting a car. This year however, I’ll be driving once again. Basically, oil prices are helping airlines with costs. However, I would assume the demand for flying is declining due to lower costs at the pump for drivers.

The question is whether the reduction in demand outweighs the reduction in costs for the airlines. I don’t have this answer. Another question to ask is how you feel about the current oil price. Today it is around $36/ barrel. If you jump into the airlines, do you feel this price is going to stick around? What happens if it jumps to $60?

I have too many questions before I dump my investments into airlines. Before you listen to the analyst on CNBC, ask yourself how you feel about airline tickets. Are you more likely to take a road trip with the lower fuel prices?

Again, I’d like some feedback on this issue.

E.M.