Full story in todays FT Worth Star Tellegram
"All of the major airlines could be in bankruptcy by early next year if oil prices stay where they are, a new study predicts.
The grim analysis, by the consulting firm AirlineForecasts, was commissioned by the Business Travel Coalition. Its author concludes that the airline industry is in a full-blown crisis "and heading toward a catastrophe."
The study found that if fuel prices remain high,
The top 25 carriers will spend over $28 billion more for fuel this year.
The major airlines could lose up to $9 billion over the next 12 months.
Fares would have to increase 20 percent across the board to compensate for the higher costs, something that "is not possible given the level of uneconomic seat capacity in the system today." Even though airlines have been raising fares aggressively, they've largely sidestepped routes where they compete against low-cost airlines such as Southwest. The Bureau of Labor Statistics reported that average fares were up about 4 percent during the fourth quarter of 2007, the most recent data available.
At least some airlines would be forced to liquidate if there are widespread bankruptcy filings.
"We're in uncharted territory in terms of the magnitude of this," said the report's author, Vaughn Cordle. He pointed out that his analysis was "a snapshot of the current situation," and that things could improve if fuel prices decline or the industry makes moves to stem the red ink. "
"All of the major airlines could be in bankruptcy by early next year if oil prices stay where they are, a new study predicts.
The grim analysis, by the consulting firm AirlineForecasts, was commissioned by the Business Travel Coalition. Its author concludes that the airline industry is in a full-blown crisis "and heading toward a catastrophe."
The study found that if fuel prices remain high,
The top 25 carriers will spend over $28 billion more for fuel this year.
The major airlines could lose up to $9 billion over the next 12 months.
Fares would have to increase 20 percent across the board to compensate for the higher costs, something that "is not possible given the level of uneconomic seat capacity in the system today." Even though airlines have been raising fares aggressively, they've largely sidestepped routes where they compete against low-cost airlines such as Southwest. The Bureau of Labor Statistics reported that average fares were up about 4 percent during the fourth quarter of 2007, the most recent data available.
At least some airlines would be forced to liquidate if there are widespread bankruptcy filings.
"We're in uncharted territory in terms of the magnitude of this," said the report's author, Vaughn Cordle. He pointed out that his analysis was "a snapshot of the current situation," and that things could improve if fuel prices decline or the industry makes moves to stem the red ink. "
