US airline catastrophe looms under record oil prices: study

CEAT Kelani Holdings Managing Director Ravi Dadlani (right) and Lanka Ashok Leyland CEO Umesh Gautham exchange the OEM agreement

WASHINGTON, June 14, 2008 (AFP) – The US airline industry is set to crash as record oil prices threaten to push several carriers into bankruptcy, threatening “our American way of life,” an industry study said. “As a consequence of the skyrocketing price of oil, the US commercial aviation industry is in full-blown crisis and heading toward a catastrophe,” said a study issued by AirlineForecasts and the Business Travel Coalition.

At current oil prices near 130 dollars a barrel, several large and small US airlines will default on their obligations to creditors, beginning at end-2008 and early 2009, the study said.

The grim industry snapshot comes as US airlines cut fleets, jobs and capacity and add fees as they struggle with spiraling jet fuel costs and a weak domestic economy.

On Thursday, United Airlines and US Airways announced they would start charging 15 dollars for the first checked bag. Both carriers this month became the latest to try downsizing to survive the fuel crisis.

The study shows that oil at 130 dollars will increase yearly airline costs by 30 billion dollars, while airlines will be able to generate only four billion dollars in fare increases and incremental fees.


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