Wednesday June 11, 2008

Peak Oil, Peak Airlines - as oil prices go up, airlines cut flights and jobs

news.yahoo.com :

As oil prices soar, airlines are coming back down to earth with a bump - cutting routes and capacity, ramping up prices and axing jobs as bosses freely admit the industry is in the "worst crisis since 9/11." Oil prices on Friday [6 Jun 2008] broke through the $139 level for the first time in New York, powered by a wilting dollar. With analysts such as Goldman Sachs suggesting the price could reach $200 a barrel within two years, the aviation industry appears to be in a nose-dive. Airlines are particularly susceptible to hikes in the oil price, as jet fuel makes up a substantial part of their operating costs.

So far US airlines are taking the brunt of the hit. Continental Airlines said Thursday [5 Jun 2008] it would cull 3,000 jobs and ground 67 aging planes in a massive retrenchment due to the price of fuel. Continental's cuts came a day after United Airlines's parent company, UAL, announced it was removing 100 aircraft and cutting up to 1,100 jobs. Two weeks earlier, AMR, the parent company of American Airlines, announced big cuts in domestic flights, shed workers and raised some fees for passengers. So far this year the industry has eliminated nearly 22,000 jobs, compared with 21,710 for the whole of 2007. Where the US leads, others follow. According to the International Air Transport Association (IATA), 24 airlines have gone bust in the past 6 months, with its member companies facing potential losses of $6.1 billion this year if oil remained around $135 per barrel.

- Peak Oil means Peak Airlines. That is, perhaps until we can find something else to fly them on, and it certainly won't be any time soon. Some, like Virgin Atlantic may be betting on biofuels but there just isn't enough to go around. Food prices are already rising, with rice, wheat and most recently corn setting new price records on a regular basis - if more companies switch to biofuels , it will only worsen the situation. Peak Airlines is just starting to hit - just like Peak Oil, we haven't seen anything yet.

See also :

1. Two major Chinese airlines including China Southern Airlines to cut flights over jet fuel costs
2. British Airways to ground part of its fleet over rising fuel cost
3. Airlines tremble at prospect of $100 oil

(2008-06-11 13:26:32 SGT) [Energy] Permalink

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