Wednesday August 23, 2006

Airlines tremble at prospect of $100 oil

peakoil.com -> usatoday.com :

Beleaguered U.S. airlines seem to have slowly staggered to their feet since the terrorism and recession of earlier this decade. But credit agency Standard & Poor's has come up with a worrisome scenario that could knock them back down: $100-a-barrel oil. What S&P sees at the $100-a-barrel level isn't pretty: Northwest and Delta airlines could be forced to liquidate; others could be pushed into Chapter 11 bankruptcy-court protection. Discount giant Southwest would likely see its remarkable profit streak halted. Industrywide, carriers would ground aircraft, cut service and lay off workers. Travelers could count on fewer choices, more travel hassles and higher fares.

According to the ATA, a 33% jump in crude prices, from $75 a barrel to $100, would increase the industry's fuel bill by $32.5 million a day. Over a year, the damage would total $11.7 billion. That's a staggering sum to an industry that collectively lost $42 billion in the five years ended in 2005. Fewer people would be willing to pay higher fares, because $100 oil would mean paying more to fill their cars, more for groceries delivered by truck, more for home energy - more for just about everything. And that would create a kind of vicious cycle for the airlines: fare increases driving away business, thereby increasing pressure to raise fares again.

See also :

1. $100 oil would threaten airlines: IATA economist
2. Airlines worldwide set to lose $3 billion this year
3. Airlines cram more fliers into fewer seats, flights

(2006-08-23 19:00:15 SGT) [Biz] Permalink

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