Tuesday May 27, 2008

British Airways to ground part of its fleet over rising fuel cost

business.timesonline.co.uk :

British Airways plans to ground part of its fleet from October [2008] to cut costs and stem potential losses caused by the crippling price of fuel. Confirmation of the move from CEO Willie Walsh comes as analysts warn BA may only break even or worse for the next two years. The sudden reversal has been caused by rapidly rising fuel prices - jet fuel went through the $1,300-a-tonne [$177 per barrel] mark last week - and sluggish demand. "It is a bloodbath," said one industry executive. Airlines rarely ground aircraft, preferring to keep their expensive fleets in the air. The airline would park its oldest, least fuel-efficient aircraft. Walsh said this would be likely to include its older Boeing 747, 767 and 737 airliners. If oil continues at $120 a barrel, BA's profits could be wiped out this year.

- An airline voluntarily parking its airliners over fuel costs instead of keeping them flying to earn some revenue? Now this is something new - they are doing this despite asset depreciation, possibly financing costs, and most definitely opportunity costs. This looks like a desperate, last-ditch measure. And if you thought crude oil prices were high at $130 per barrel or over, check out the jet fuel prices above - the refined product is reportedly going for over $177 per barrel.

Updated :

1. Two major Chinese airlines including China Southern Airlines to cut flights over jet fuel costs
2. Peak Oil, Peak Airlines - as oil prices go up, airlines cut flights and jobs

(2008-05-27 23:02:55 SGT) [Energy] Permalink

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