AIRLINES GIVING WAY TO AIRSHIPS?
"HAWAII TOURISM: IN A PANIC MODE?"
Four more airlines have liquidated this year, and one is operating in Chapter 11. Estimates are that fuel increases will cost the airline industry $15 billion in additional fuel costs, this in an industry with around $23 billion in cash.
“Pick your poison,” writes David Glenn Cox. “Let the fuel costs kill you or raise fares until the public stops flying. But the airlines are the canary in the coal mine for the trucking companies… (and) freight haulers… A factory that I used to order from gave us free freight on orders over ten thousand dollars. That deal is now out the window. With freight rates up 40%, the ten thousand-dollar order wouldn't cover their own freight costs.”
Cox continues: “This will be a bad summer for air travelers… Some observers believe many officials in the airline industry are in full panic mode. No wonder. The price of fuel is pushing up expenses dramatically. A trade group points out that for every $1 increase for a barrel of crude oil, the cost to the airline industry is $460 million. Already eight airlines have closed or declared bankruptcy since Christmas.”
By
William Thomas
With fuel-guzzling world airlines in deepening trouble over rising fuel prices, and inevitably restrictive encvironmental regulations, timing appears propitious for bold forays into scheduled short-haul and long-haul airship service. A sampling of recent headlines and news stories:
THE OIL PANIC OF 2008
Gerard Arpey, chairman and CEO of American Airlines, said last week at the annual shareholders meeting, "The U.S. airline industry, as it is constituted today, was not built for $125- or $130-per-barrel oil. The industry will not and cannot continue in its current state."
AIRLINES' CUTS MAKING CITIES NO-FLY ZONES
“Airports have grown quiet in many communities,” the New York Times reports. Flights seem to be disappearing by the day (as) financially strapped airlines are cutting service… "
Nearly 30 cities across the United States have seen their scheduled service disappear in the last year. Over the same period, more than 400 airports, in cities large and small, have seen flight cuts. Over all, the number of scheduled flights in the United States dropped in May 2008 to 22,900 fewer flights than in May 2007.”
Service cuts will continue as jet fuel prices rise, the paper predicts. “Given the steep rise in fuel prices” -up a staggering 85% from a year ago - “airlines have to make difficult choices on service.”
So do passengers. The Air Transport Association predicts 2 million fewer passengers will fly between June 1 and Aug. 31 - down more than from last year's record of 214 million.
“Eliminating flights is the latest move by the airlines in a cost-cutting drive that also has led to ticket prices climbing 10-times this year,” the Times goes on. “Almost every major carrier, from American Airlines to Delta Air Lines and US Airways, is crossing cities off its list.”
As fuel prices surge, and George Bush contemplates bombing Iran and sending oil over $200 a barrel, those airlines may soon be crossed off their own lists of viable carriers.
"Soon after the invasions of Afghanistan and Iraq the price of oil began to escalate in tandem with the escalation of war and political turbulence in the Middle East," writes economist Ismael Hussein-Zadeh, a professor of economics at Drake University in Des Moines, Iowa. "Anytime there is a renewed US military threat against Iran, fuel prices move up several notches."
In Hussein-Zadeh's view, a U.S. attack on Iran would send oil prices into the ozone later, with $200/barrel being a starting point.
[commondreams.com]
Right now, $100 million in government subsidies guaranteeing airline service to 102 American communities have not risen fast enough to cover the jump in jet fuel costs. Industry consultant Robert Mann Jr. sees only one way that small cities can attract new business: “You can profitably fly small airplanes only if the people on them pay very high prices.”
[New York Time May 21/08]
AN AIRLINE INDUSTRY NEVER DESIGNED FOR $130 OIL 'AT A CROSSROADS'
Last fall, airline consultant Michael Boyd took a gander at energy prices and warned, "We figure at $80 a barrel, most airlines can make money, barely. If it goes to 90 bucks a barrel, I don't know, invest in Enron or something."
"Few of us thought, when we announced those earnings seven months ago, that we would ever look back fondly at $90-a-barrel oil," American Airlines chairman and chief executive, Gerard Arpey told shareholders at the company's AGM this month.
“On Monday, Arpey prepared his speech to shareholders referring to $125 oil. By Wednesday's speech, prices were at $130. Later the same day, prices hit $133,” writes Terry Maxon.
U.S. airlines estimate that each $10 rise in the price of a barrel of crude oil raises its annual jet-fuel bill by $800 million. They will spend a minimum $60 billion burning jet fuel in an already carbon-compromised atmosphere - up $18 billion from 2007. The increase, says the Airline Transport Association, is "equivalent to purchasing 261 narrow-body jets."
Today, 40% of an airline ticket pays for fuel, compared with 15% in 2000.
"Although airlines will seek to recover the higher [fuel] costs through additional fare hikes and higher fees, we believe that this will prove increasingly difficult in a weak U.S. economy," said S&P credit analyst Philip Baggaley.
Industry analyst Ray Neidl of Calyon Securities says the industry "is at a crossroads at current oil prices." Neidl estimates that U.S. airlines need to cut flights throughout the United States and Canada by at least 20% - or the entire capacity of Continental Airlines, US Airways and Frontier Airlines.
In the last week of May 2008, as U.S. investors studied a proposal to fly extremely fuel efficient airships that derive their lift from lighter-than-air gases rather than brute, petroleum-powered force, American announced it would ground 75 airplanes and lay off thousands of workers. Arpey promised more cuts in service and staff if fuel prices keep rising.
As the first DOE secretary James Schlesinger said: "We have only two modes-complacency and panic." [Dallas Morning News May 23/08; timebomb2000.com]
ERA OF CHEAP FLIGHTS IS OVER SAYS BA BOSS AS PRICE OF OIL SOARS
Announcing that cheap air travel is “over” as airlines face spiraling fuel prices, British Airways' boss Willie Walsh says passengers now face escalating fares and surcharges levied to cover the surging cost of oil. Many airlines will go bust, Walsh warned.
For millions of Britons, unless they can transfer to as yet non-existent, fuel-efficient dirigibles, this is the end of popular weekend breaks to Barcelona, Prague or Turin.
“I don't think the industry can absorb the significant increases (in fuel costs),” Walsh said. “This is about survival.”
As if to underline the deepening crisis, shares in British-based business airline Silverjet were suspended as a promised £12million cash bailout stalled and crashed. Business class only airlines Maxjet and EOS have already augured in, along with London to Hong Kong budget carrier Oasis.
BA will cut thousands of flights this winter as it drops less profitable routes.
With soaring oil prices raising the specter of a $1,500-a-year rise in fuel bills for the average UK family, only airships can save the industry as business leaders warn that companies are being pushed “to the absolute edge.” [Daily Mail May 24/08]
PILOTS WARN DESPERATE AIRLINES RISKING OUT OF FUEL CRASHES
Pilots are complaining that airlines are challenging their refueling decisions, urging them to carry only the minimum fuel required by FAA regulations in order to reduce the weight of the plane and improve mileage. Complaining pilots have said that airlines are hewing deliberately close to FAA guidelines without regard for "the reality of the day"… resulting flights are technically safe but don't leave enough room for the unexpected. Some airliners are arriving at Newark Liberty International Airport in New Jersey with dangerously little fuel left in their tanks.[MSNBC Apr 18/08]
