Fuel costs may bankrupt most airlines

A business travellers group has released a new study with the dire prediction that most airlines will face bankruptcy by next year if the cost of jet fuel increases or remains at present levels.

The Business Travel Coalition commissioned the study, which indicates that commercial aviation is “in full-blown crisis and heading toward a catastrophe.”

“Over the long term everybody says that these kinds of fuel costs just can’t be sustained,” Fort Worth Star-Telegram industry writer Trebor Banstetter said. “The industry isn’t built to operate under these conditions.”

With oil prices at $130 a barrel, airlines shoulder an operating cost of $30 billion a year. This is a cost that they might not be able to recover by raising airfares and increasing other charges to passengers.

“You can hit a point where if they raise the prices high enough, people will just stop flying,” Banstetter suggested. “So there is a ceiling there, and the question is, ‘When are you going to hit it?’”

At this point, passengers seem to be dealing with higher prices and new charges.

“If people are going to pay $5 a gallon to drive, I’m pretty sure they’ll dish out the money to fly,” commented a traveller at the Dallas-Fort Worth International Airport. “I mean, I’m still going to be upset about it, but you can’t change it.”

Although most industry analysts agree that airlines are in trouble, not all would agree that the forecast is bleak. Some analysts predict that the airline industry could turn around in 2009 or 2010.

businesstravelcoalition.com