Saying Goodbye to Air Travel

Saying Goodbye to Air Travel

14 May 2008

by Richard Heinberg

The airline industry has no future. The same is true for airfreight. No air carrier has a viable plan to make a profit with oil at current prices—much less in years to come as the petroleum available to world markets dwindles rapidly.

That’s not to say that jetliners will disappear overnight, but rather that the cheap flights we’ve seen in the past will soon be fading memories. In a few years jet service will be available only to the wealthy, or to the government and military.

Sir Richard Branson of Virgin Atlantic says he wants to use biofuels to power his fleet of 747’s and Airbuses. There are still some bugs to be worked out in terms of basic chemistry, but it might be possible in principle—if only we could make enough biodiesel or ethanol without further driving up food prices and wrecking the soil. Even then it would be very costly fuel.

Are there other options for powered flight?

Hydrogen could be burned in jet engines, but doing so would require a complete redesign of our commercial aircraft fleet, and H2 would be expensive to make—unless the growing trend toward more costly electricity (as we phase out depleting, polluting coal and increasingly scarce natural gas) can somehow be reversed.

Last year I was invited to give the keynote address at the world’s first Electric Aircraft Symposium. NASA and Boeing sent representatives, but all told there were only about 20 in attendance. The planes being discussed were ultralight two-seaters: that’s the limit of current or foreseeable battery technology. These might come in handy in a future where they are the only option for emergency air travel (blimps need depleting helium or explosive hydrogen). But forget about 300-seat planes running on solar or wind power, ferrying middle-class vacationers to Bali or Venice.

There are good reasons to cut down on air travel voluntarily: flying not only swells our personal carbon emissions but spews CO2 and other pollutants into the stratosphere, where they do the most damage. However, the worsening scarcity of the stuff we use for making jet fuel takes the discussion out of the realm of optional moral action and into that of economic necessity and personal adaptation.

I fly to educate both general audiences and policy makers about fossil fuel depletion; in fact, I’m writing this article aboard a plane en route from Boston to San Francisco. I wince at my carbon footprint, but console myself with the hope that my message helps thousands of others to change their consumption patterns. This inner conflict is about to be resolved: the decline of affordable air travel is forcing me to rethink my work. I’m already starting to do much more by video teleconference, much less by jet.

Those who live far from family will be more than inconvenienced, as will the hundreds of thousands who work for the airline industry directly or indirectly, or the millions who depend on tourism or airfreight for an income. These folks will have few options: teleconferencing can accomplish only so much.

Our species’ historically brief fling with flight has been fun, educational, and enriching on many levels to those fortunate enough to benefit from it. Saying goodbye will be difficult. But maybe as we do we can say hello to greater involvement in our local communities.



http://globalpublicmedia.com/saying_goodbye_to_air_travel

So he's saying "do as I say, not as I do".

If I can afford to fly, I will. It has nothing to do with emissions or carbon output, or whatever garbage they want to call it. It's greed. The entire global warming concept is all for one reason - to line someone's pockets. It's the biggest scam of the century.

There's enough pollution coming out of Washington DC to choke every man, woman, child and 4-legged creature on this planet.

Do I care if the world's average temperature increases 3 degrees 50 million years from now? No.

Mrs Smith said:

So he's saying "do as I say, not as I do".

If I can afford to fly, I will. It has nothing to do with emissions or carbon output, or whatever garbage they want to call it. It's greed. The entire global warming concept is all for one reason - to line someone's pockets. It's the biggest scam of the century.

There's enough pollution coming out of Washington DC to choke every man, woman, child and 4-legged creature on this planet.

Do I care if the world's average temperature increases 3 degrees 50 million years from now? No.

Click to expand...

Sums it up well.

I agree with the "Do as I say" part, but what about the first part of the article? Fuel [i[]is[/i] getting more expensive; the price is passed on to the customer, and most people will reach a point where they say, "Hey, we can't afford to spend 2 grand to fly down to Disney World!"

Watch as the smaller airlines start folding, or get swallowed up by the bigger companies, all because they are getting priced out of the market.

--Rich
Zeppelins, anyone?

RiJoRi said:

I agree with the "Do as I say" part, but what about the first part of the article? Fuel [i[]is[/i] getting more expensive; the price is passed on to the customer, and most people will reach a point where they say, "Hey, we can't afford to spend 2 grand to fly down to Disney World!"

Watch as the smaller airlines start folding, or get swallowed up by the bigger companies, all because they are getting priced out of the market.

--Rich
Zeppelins, anyone?

Click to expand...

I was thinking the same thing. Something akin to sailboat in the air.

Zeppelins would work to a limited extent. Trouble is, they're far more weather-sensitive than airplanes. They're also much, much slower, and it was the speed of airplanes which made them popular.

Navy ships have proven the efficacy and safety of nuclear power. Ocean freight at slower speeds than air travel would be the future method of hauling even high-value cargo--and no oil needed.

IOW, the world is gonna slow down a lot.

Flying to cost more, British Airways chief Willy Walsh warns
By David Millward, Transport Editor
Last updated: 3:55 PM BST 16/05/2008
The cost of flying is set to soar because of the rising price of oil, Willie Walsh, British Airways chief executive, warned today
.
Despite the airline announcing a jump in profits, passengers can expect to dig deeper into their pockets to fly.

"I think the era of very low fares is behind us because fuel prices remain at record levels there is no sign of those fuel prices reducing.

"It is clear that there are airlines which will struggle to survive and indeed are struggling to survive with oil prices where they are.

"I think it is inevitable we will see some of the oil prices flow through into fares."

BA has announced two sets of fuel surcharges this year, increasing the levy on individual long haul flights of up to nine hours from £48 to £63.

This will have added an additional £120 to the cost of a family of four's holiday to New York or Florida.

Over the past year the price of aviation fuel has almost doubled. Even though the airline buys a proportion in advance under a system known as hedging, this is unable to insulate BA and other airlines from world conditions.

It had been hoped that the Open Skies agreement between the EU and the USA would have triggered a transatlantic fares war as more carriers competed for passengers.

But this now seems less likely given both the cost of fuel and the collapse of Eos and MaxJet two niche airlines flying between London and New York.

The results announced by British Airways yesterday showed the airline in sound financial health, with pre tax profits jumping from £611 million to £883 million.

But at the same time BA was one of Europe's worst performing carriers in terms of punctuality and baggage according to statistics compiled by the Association of European Airlines.

The airline lost more than a million bags in 2007 and is in danger of doing so again this year, especially after the disastrous opening or Terminal 5.

While consumer groups welcomed the airline's financial performance, they felt more money needed to be invested on behalf of passengers.

"It seems a slight paradox between a highly successful business story and the way the airline's performance has measured against its major competitors," said Simon Evans, chief executive of the Air Transport Users Council.

"It would be very nice if some of this profit was translated into much better performance on baggage."


http://www.telegraph.co.uk/news/196...ys-chief-Willy-Walsh-warns.html?service=print

Air travel may drop by 3 million passeners this summer
May 16, 2008




Air travel is expected to be down this summer because of economic concerns.

David Castelvetter of the Air Transport Association predicts about 211 million people will hop a flight between June 1 and Aug. 31. That's 3 million fewer than last year.

Airlines, as well as travelers, are faced with some very difficult decisions in the name of survival, Castelvetter says.

``They're trying to raise their fares, and there are limits to how much you can raise your fares before people just choose not to fly," Castelvetter says. ``They are also unbundling many of the services that used to come with the price of a ticket. You see some carriers charging for an extra bag, charging for extra weight."

The list goes on. ``Charging for a meal on-board an airplane, charging for making a reservation over the telephone. Those are ways they're trying to find ala carte revenue, in addition to trying to find ways to reduce their fuel costs which are simply killing them."

So far, most summer travelers are not changing their plans, despite increasing costs.

The skyrocketing jet fuel prices, and even Mother Nature, could create summertime challenges for the airlines like never before, Castelvetter says..

``We're trying to work with the government to speed up many of the processes, to reduce those delays in New York and the ripple effect across the system," Castelvetter says. ``But, if we have a strong hurricane system, it's going to create some real challenges and additional costs."

Castelvetter predicts planes will be flying about 85 percent full this summer. He says, with the cost of jet fuel approaching $170 a barrel, airlines will be taking every conceivable step to minimize delays and save fuel.



http://www.ktar.com/index.php?nid=388&sid=839061

Anyone remember when air travel used to be fun?
They treated you like VIP's. The food was even edible?
You were able to go out on an oservation deck to look at the planes.
Now you have to get to the airport 2 hours before your flight.
Sometimes the flight isn't even that long. You are herded around the airport even before you get on the plane. Are subjected to having you belongings searched.
You have to remove your shoes, empty your pockets as you pass through a metal dector. Then you can proceed to your gate. When you get on the plane, you are lucky to get a coke.
Well too bad for the airlines. You can't keep treating people like sh!t and expect them to continue to come back.
High fuel prices or not the airlines were already in trouble.

www.chicagotribune.com/business/chi-mon-airlines-fuel-survivemay19,0,4883439.story

chicagotribune.com
AIRLINE INDUSTRY
Fuel costs may thrust airlines into bankruptcy
Cash shrinking fast as 10 largest carriers struggle to boost revenue
By Julie Johnsson

Tribune reporter

May 19, 2008

It is a thrill ride nobody wanted.

Just months after reporting their highest annual profits in eight years, U.S. airlines are in a nose dive that could leave some major carriers in bankruptcy.

Leaders at Chicago's United Airlines and across the industry are scrambling to devise business models that will hold up to the stresses of $128 per barrel crude oil and a sluggish economy.

If the 10 largest U.S. airlines don't boost revenues and restructure loans, their cumulative cash could shrink 62 percent to about $8.6 billion by year's end, estimated Philip Baggaley, chief credit analyst at Standard & Poor's.

That's not sufficient to cover one month's expenses at the carriers, he said. "In other words, in this simplified example, the airlines, as a group, would be at risk of bankruptcy," Baggaley wrote in a research report Friday.

To gain pricing power in a fragmented, overserved industry, U.S. airlines need to cut as much as 20 percent of domestic flights, analysts said. That's equivalent to grounding two major carriers.

It is uncharted territory; what American Airlines Chief Executive Gerard Arpey termed "an environment of continuous disruptive change" in a letter to employees last month.

It comes as United's directors ponder one of the biggest strategic maneuvers in the carrier's 77-year history: a high-risk merger with US Airways that could reap rewards if executives can steer clear of potentially ruinous labor showdowns.

United is also exploring a code-share partnership with Continental Airlines that would allow the carriers to sell tickets on each others' flights. Such a virtual merger could lead to the full-fledged combination similar to the deal that Continental executives rejected last month, analysts say.

But there's no guarantee either option will pan out, analysts warn.

Airline mergers are unwieldy and notoriously difficult to complete. Continental, meanwhile, has other suitors. The Houston-based carrier has also held talks with American Airlines and could opt to remain allied with its current marketing partners, Delta and Northwest Airlines, which are also merging, sources said.



No easy answers
Deciding on a course is not easy for executives at United or any other carrier, especially given the stakes involved and the volatility of the global fuel markets. Crude oil prices have doubled over the past year, rising about 15 percent in the past two weeks alone. "Fuel is astronomically expensive, to the point of pushing the industry past the point of economic viability," said Henry Harteveldt, travel industry analyst with Forrester Research Inc.

"Change clearly needs to be made, and it's going to have to come across a host of areas," said Kathryn Mikells, United's vice president for investor relations, who declined to discuss its negotiations with US Airways or Continental. "There isn't a single silver bullet."

A United-US Airways tie-up would bring about $1.5 billion in savings and new revenues to help offset the nearly $6 billion increase in fuel costs the two carriers could see this year, say people familiar with the discussions.

The resulting carrier would have a broad national network that would feed more passengers, particularly wealthier travelers in US Airways' eastern seaboard strongholds, to United's lucrative international routes, analysts said.

The carriers could also eliminate costs by paring operations at selected hubs where their networks overlap. Harteveldt sees US Airways operations at Philadelphia, Washington, D.C., and Phoenix as prime candidates for cuts.

And the sell-off that has battered both airlines' stocks could actually work to the advantage of investors in the merger. US Airways' market capitalization has shrunk to just $718 million, the lowest among major carriers; United's worth is $1.74 billion, down 61 percent since Jan. 1.

Given these depressed prices, any financial gains resulting from the tie-up would likely send shares soaring, providing larger returns than investors would have seen if the companies' combined market value had been higher.

"The lower the range the stock goes, the better the future return," said Roger King, airline analyst with CreditSights Inc. But that only holds true for recent investors in the companies, he added. Any gains wouldn't likely offset losses suffered by shareholders who have ridden United shares down from the $40-range to $13.81, Friday's closing price.

People close to the airlines say that while they have made progress, a deal is not imminent. Issues that must still be resolved include who will run the combined airline and how the resulting carrier would be branded.

Then there's the threat that disgruntled workers will undermine or disrupt operations following a deal. United's unions oppose the merger, in part because they don't want to be drawn into the labor strife that has riven US Airways since its takeover by Phoenix-based America West three years ago.

Tensions among US Airways' east- and west-based pilots are so heightened that there are reports of pilots refusing to allow their counterparts from the rival faction to ride on the jump seats in their cockpits, a common courtesy among U.S. airlines that lets off-duty pilots get to their destinations quickly.

Such distractions are the last thing the management teams need to deal with in this environment, said Kevin Mitchell, chairman of the Business Travel Coalition, a Pennsylvania-based advocacy group for large corporate travel buyers.

"That's a huge risk: These management teams are off in a quagmire trying to pull this together while their competitors eat their lunch," he said.


Most in the red
None of the major American carriers are expected to earn a profit in 2008, except Southwest Airlines, which is expected to benefit from costly hedges against rising fuel costs.

United, American and Northwest Airlines have all renegotiated covenants that would likely cause them to default on loans later this year if cash flows continue to decline. United also renegotiated an agreement with its largest credit card processor.

Even Southwest last week mortgaged 21 aircraft to raise $600 million in cash, bolstering the $3 billion it already has on reserve. Southwest spokeswoman Brandy King said the Texas-based discounter decided to "take advantage of attractive financing" and said the cash would go to "general corporate use."

While Southwest adds to its network, every other major airline is planning big cuts in flying after the busy summer travel season. United already has identified 52 flights that will be cut and is studying its network for others as it plans to ground at least 30 planes and trim its domestic network by 9 percent during the fourth quarter. It could reduce flying further if fuel costs continue to rise, Mikells said.

The nation's second-largest carrier is looking at a host of other ways to trim costs and raise revenues. Those initiatives are being coordinated by a council of senior leaders established to streamline planning. As of July 1, United will end a long-standing policy of awarding at least 500 frequent flier miles to its Mileage Plus members, no matter how short the flight. And earlier this month, it started charging passengers $25 to check a second bag, a policy other airlines also have adopted.

The baggage fees alone should generate $1 billion in new revenue for the 10 largest U.S. carriers this year, estimates AirlineForecasts LLC. But that isn't nearly enough to cover the $23 billion jump in fuel costs that they face this year if oil stays at current levels, according to the Virginia-based market research firm.

If oil prices don't drop, financial pressures will grow for airlines as the year progresses, analysts predict. "There is probably no more challenging time for them since Sept. 11 in terms of running their business," said Forrester's Harteveldt.

May 21, 2008
Airlines’ Cuts Making Cities No-Fly Zones
By MICHELINE MAYNARD
Earlier this decade, city officials in Hagerstown, Md., started making the case to build a longer runway at their airport to lure service by regional jets, instead of the turboprop planes that provided its only flights.

Several years and $61.4 million later, the city opened its concrete welcome mat, a new 7,000 foot runway, last November — two months after the airport lost scheduled air service altogether.

Despite its costly investment, a dogged marketing effort by local officials and even help from Congress, the airport has had no luck attracting a new carrier, as the industry struggles under soaring fuel prices.

“Could we pick a worse time to go out and get commercial service? Probably not,” said Carolyn Motz, director of the Hagerstown Regional Airport, which had 10 daily flights a decade ago.

The airports have grown quiet in many other communities, too.

Financially strapped airlines are cutting service, and nearly 30 cities across the United States have seen their scheduled service disappear in the last year, according to the Bureau of Transportation Statistics. Others include New Haven, Conn.; Wilmington, Del.; Lake Havasu City, Ariz.; and Boulder City, Nev.

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 3 percent in May, or 22,900 fewer flights than in May 2007, according to the Official Airline Guide.

And the service cuts are far from over, as jet fuel prices rise, airlines shut down and companies consider mergers, like the Delta-Northwest deal.

For American travelers, the shift means that they can no longer bank on scheduling flights to reach their destination within a single day, said Robert W. Mann Jr., an industry consultant in Port Washington, N.Y.

“Everybody expects frequent, convenient, high-quality service with great connectivity to the rest of the world,” Mr. Mann said. But given the steep rise in fuel prices, which are up 84.5 percent from a year ago, airlines have to make difficult choices on service.

Fewer passengers are expected to fly this summer, traditionally the peak season for air travel — partly because of the soft economy, of course, but the difficulty of traveling may also be a factor.

The Air Transport Association, an industry trade group, predicts 211.5 million people will fly between June 1 and Aug. 31, down more than 2 million passengers from last year’s record of 213.5 million.

Flights seem to be disappearing by the day.

Last week, Mesa Air Lines, a regional carrier based in Phoenix, said it would shut down Air Midwest, a regional subsidiary, on June 30. The move will eliminate service to 16 small cities in the 10 remaining states where Air Midwest, which had already cut flights, still operated.

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 and new fees, from charges for checking extra bags to changing itineraries.

Almost every major carrier, from American Airlines to Delta Air Lines and US Airways, is crossing cities off its list, leaving passengers with fewer choices than a year ago.

Some travelers have no choices, but it is not for lack of trying by city and state officials. After Hagerstown briefly lost its eligibility for a government program called the Essential Air Service last year, Maryland’s Congressional delegation helped win an extension that allowed Hagerstown, as well as Lancaster, Pa., and Brookings, S.D., to remain in the program until Sept. 30.

The Essential Air Service program was created in 1978, when the airline industry was deregulated, to ensure that communities in rural and remote areas would be linked to the nation’s air system.

Under the program, the government provides subsidies of about $100 million a year to the airlines, resulting in service to 102 communities.

But the subsidies have not risen fast enough to cover the jump in jet fuel costs, and passengers have resisted paying higher prices for plane tickets, prompting carriers to pull out of a number of cities, including Hagerstown.

Now, some lawmakers are pushing for more money for the air service program as part of a broader funding bill for the Federal Aviation Administration that is before the Senate. The House passed the measure last year.

Even with the longer runway, and the federal subsidy, Hagerstown has not been able to persuade another carrier to take the place of Air Midwest, which discontinued its two daily flights to Pittsburgh last fall.

Ms. Motz says that is now unlikely to happen before the extension expires, given the time an airline needs to start new service. “With airlines going out of business and capacity being reduced, it is very difficult,” she said.

Lacking flights, Hagerstown residents must drive an hour and a half to Baltimore-Washington International Airport, or face even longer trips to Washington’s two airports.

Without passenger service, the airport’s revenue comes primarily from military and private aviation.

“We would love to have service here, especially since there have been millions of dollars in improvements,” said Lewis Metzner, a city council member.

Plattsburgh, N.Y., is also hoping to get more flights. And it has more than just a longer runway — it has a brand new airport, built on a former air force base.

The airport offers three flights a day on a nine-seat Cessna to Boston, via Cape Air, as well as three flights a week to North Carolina on Myrtle Beach DirectAir and four weekly flights to Fort Lauderdale and Orlando on Allegiant, a low-fare carrier.

Plattsburgh had a daily flight to Albany under CommutAir, a commuter carrier linked to Continental Airlines that operated 19-seat aircraft. But CommutAir discontinued service to Plattsburgh last year, before the airport moved to its new location.

Now, the town’s only current connection to a major airline is through Cape Air, which has partnership arrangements with Continental and JetBlue.

Cape Air service is provided under an Essential Air Service contract that gives Cape Air with a subsidy of $650 a flight, or about $73 a passenger for a trip that costs $94 one-way, said Christopher D. Kreig, the airport’s manager.

But the subsidies have not ensured stability. Cape Air is the third airline in a year to hold the contract. After CommutAir pulled out, Big Sky Airlines served Plattsburgh for just seven weeks, leaving in January, when the airline dropped service to East Coast airports.

However, Myrtle Beach and Allegiant came in without government assistance, attracted in part by the airport’s proximity to Canada, which Plattsburgh emphasizes in its marketing campaign.

Mr. Kreig acknowledges the service is an odd mix for Plattsburgh’s passengers.

But Mr. Mann, the industry consultant, sees only one way that small cities like Plattsburgh can attract new business — and it is probably one that passengers will not like. “You can profitably fly small airplanes only if the people on them pay very high prices,” he said.

Mary M. Chapman contributed reporting.

http://www.nytimes.com/2008/05/21/b...8781e596fc6ad2&ex=1211515200&pagewanted=print

Say goodbye to air travel

I already have. Years ago. I even so much as said so to my employers. If it ain't local, I ain't going.

I said goodbye to air travel.

Howdy, Folks!


Last lengthy trip I took, I did by train.

Beat the crap outta plane travel. Very civilized, and at that time(2006) no rummaging through my belongings.

If I leave the country - I'm going by boat.

Maybe we'll go back to using sails...

It's no big deal to drive 1.5 hours to BMI. My Aunt use to drive 3.5 hours to Sea-Tac from Wenatchee, WA to pick up and drop off relatives. Airfares too expensive to fly between both cities.

Saying Goodbye to Air Travel-Say Hello To Greyhound And Amtrak.

Guess I'll have to buy that Gulfstream G-5, after all...LOL.

TB

Why Not Fly 1st Class

TBeezley1 said:

Guess I'll have to buy that Gulfstream G-5, after all...LOL.

TB

Click to expand...

A380 Video

http://www.youtube.com/watch?v=HvR1...deo.google.com/videosearch?q=a380&sitesearch=

You want more "leg room"

http://business.timesonline.co.uk/tol/business/columnists/article3981436.ece



May 22, 2008

Airlines fly by the seat of their pants
David Wighton, Business Editor
American Airlines yesterday appeared to cross the Rubicon, asking its passengers to pay $15 (£7.60) to check in a bag when they arrive at the airport. What will be its next gambit? Perhaps, a $5 charge for using your laptop inflight, pay-per-view movies and coin-operated lavatories. AMR, the airline's parent announced yesterday that its new baggage fee, plus a whole raft of other service charges (flying your pet poodle will cost you more) would generate hundreds of millions of dollars in extra revenue.

How long will that keep the creditors at bay? For AMR and every other airline operator the soaring cost of jet fuel has exposed a fatal weakness for an industry that has been riding for years on a wing and a prayer.

It is not just some carriers that are in trouble; the business model of an entire industry is close to bust.

Since the end of January, the cost of the fuel that keeps planes in the air has risen by almost 60 per cent.

Even as the price of a tonne of jet fuel hit $1,350 per tonne in Rotterdam yesterday, airlines were still increasing capacity, adding more and bigger planes to their fleets and adding more routes.

North Atlantic traffic, the big earner for most airlines, has not been growing since January and Asian routes are similarly stuck in the doldrums but more planes are flying more kilometres every day, according to statistics from the Association of European Airlines. From January to May, capacity for scheduled European airlines rose by 3.5 per cent as traffic grew by 1.7 per cent.

It doesn't add up and yesterday, AMR admitted as much, announcing that its airline would shrink. The company will shed between 75 and 80 jets reducing the available seats by 12 per cent. In explanation, the company said that its jet fuel bill was $665million more in the first quarter than a year before - in other words, while fuel cost 45 per cent more, revenues rose by only 5 per cent.

British Airways said last week that it had been forced to contemplate the possibility of the £875million annual profit just reported being wiped out this year because of the rising oil price.

Airlines admit that they have no idea how much demand will be reduced by the fare increases they will be forced to make. But even if the impact is modest, the industry will be in real trouble.

“The airline industry was not built to withstand oil prices at $125 per barrel,” said Gerard Arpey, the chairman of APR, yesterday. Indeed, it is not and it is now clear that the game has changed utterly.

The airline industry was built in a fantasy world of cheap energy and ever expanding traffic that is gone, possibly forever. It is no longer about putting bums on seats but getting rid of the seats.

Oil rocks airlines
Thu May 22, 2008 1:44pm BST
By Daryl Loo and Tim Hepher

SINGAPORE/PARIS (Reuters) - Airlines around the world braced for slower growth, tighter earnings and deeper cost cutting on Thursday as oil prices surged and the biggest carrier by revenue, Air France KLM, warned on profits.

Oil's spike to a record $135 a barrel knocked airline shares worldwide, with top U.S. carrier American Airlines revealing its sharpest cutbacks since the hijack attacks of September 11 2001, including thousands of job cuts.

Air France KLM's chief executive, Jean-Cyril Spinetta, warned the airline would have to expect a 1.1 billion euro (873 million pounds) rise in fuel costs, squeezing profits this year and forcing it to find 150 million euros in savings.

It now expects an operating profit "in the region of 1 billion euros", Spinetta said, which would mean a fall of 30 percent from the year which ended in March.

"The current year is set to be challenging, with the oil price and the global economy creating significant uncertainty," Spinetta said.

Oil prices have surged 170 percent since the start of 2007 and airlines have been toppled, including U.S.-based transatlantic all-business carrier Eos and budget airline Aloha Airlines.

American Airlines said on Wednesday it plans to chop its U.S. capacity by up to 12 percent in the fourth quarter, underscoring the impact on industry heavyweights and sending shares in parent AMR Corp plunging 24 percent.

Air France shares were off 10 percent at 16.8 euros and German rival Lufthansa was down 3.5 percent at 15.6 euros as of 1 p.m.. In Asia, Japan Airlines (JAL), fell back 2.1 percent to 240 yen and Singapore Airlines lost 1.6 percent to S$15.80 .

Australia's Qantas Airways put up international fares by 4 percent and domestic ones by about 3 percent in its second such move in a month.

NEED TO ACT

JAL, Asia's biggest carrier by sales, said it too needed to act.

"We try to absorb it ourselves but it's beyond our ability to absorb all of it and we need to transfer (some) to our customers," Chief Executive Haruka Nishimatsu told Reuters in Singapore.

The cost of jet fuel traded in Singapore has risen by more than half this year and analysts expect more cost cutting, particularly among U.S. carriers as an economic slowdown puts off travellers.

"It is going to actually send some (smaller) airlines into bankruptcy," said Nick van den Brul, analyst at Exane BNP. "The best position for an airline is to have a good hedge already in place ... a euro exposure to the dollar and also the ability to cut costs."

Even for carriers with fuel hedges providing a buffer there are other challenges as the economic uncertainty in the United States and elsewhere threatens growth plans.

Some carriers are also the subject of sweeping EU and U.S. investigations into allegations of price-fixing in air cargo which pose cost risks, as seen in Air France KLM taking a 530 million euro pre-tax provision on Thursday.

There is pain too as delays in new, more fuel-efficient planes put expansion plans and urgently needed cost savings on hold.

Airbus announcing a fresh delay in A380 superjumbo deliveries this month and Boeing's 787 Dreamliner now running 15 months late.

JAL boss Nishimatsu complained on Thursday that the 787's delay was hurting the airline's expansion plans.

Tough times could also bring consolidation, analysts say.

Lufthansa Chief Executive Wolfgang Mayrhuber said on Wednesday he was willing to consider taking a stake in smaller neighbour Austrian Airlines.



http://uk.reuters.com/article/tnBas...SS&feedName=tnBasicIndustries-SP&pageNumber=1

... "I think it is inevitable we will see some of the oil prices flow through into fares." ...


Suspect it'll be a LOT more than merely 'some'...

Sleeping Cobra said:

Saying Goodbye to Air Travel-Say Hello To Greyhound And Amtrak.

Click to expand...

I would have never road Greyhound due to all the dirties on there. However, I can see Grayhound start offering much nicer buses for those will to pay a little more to be seated next to more decent folks.

During WWII Germany used liquefied coal to make gas an diesel fuel for the war machine. If it weren't for the ecofreaks we could do the same we have more coal them Saudis have oil. They are worried about the carbon foot print I know where I would like to leave my foot print.

Bad Hand said:

During WWII Germany used liquefied coal to make gas an diesel fuel for the war machine. If it weren't for the ecofreaks we could do the same we have more coal them Saudis have oil. They are worried about the carbon foot print I know where I would like to leave my foot print.

Click to expand...

This is why I have invested in the coal ETF. If Israel drops the bombs on Iran, we may have no choice but to use coal for gas and nuclear power for electricity. I would look for an electric high speed rail network to form almost overnight.

Mrs Smith said:

So he's saying "do as I say, not as I do".

If I can afford to fly, I will. It has nothing to do with emissions or carbon output, or whatever garbage they want to call it. It's greed. The entire global warming concept is all for one reason - to line someone's pockets. It's the biggest scam of the century.

There's enough pollution coming out of Washington DC to choke every man, woman, child and 4-legged creature on this planet.

Do I care if the world's average temperature increases 3 degrees 50 million years from now? No.

Click to expand...

Wow...I'm beginning to think that some people's brains are being damaged by the very greenhouse gases they claim aren't a problem.

He's not saying "do as I say, not as I do." He's saying that while there are certainly moral reasons to choose not to fly, that any choice in the matter is, for the vast majority of us, going to disappear completely as airline travel becomes something that very, very few of us will be able to afford.

I wont miss airline travel. I hated it before 9/11, as I felt we were the paying customer, and yet we were treated like cattle. After 9/11, it got worse and on top of that, you can no longer complain about it. If you do, you're tagged as a troublemaker and can be arrested or flagged to be body searched every time you travel. So we're paying more than ever before and treated worse than ever before.
So I have not travelled by air since 9/11. It has nothing to do with a fear of flying. I tolerated it, usually napping during the flights. I never liked how I was treated though and so when things got worse after 9/11, I quit using the airlines.
Now, for business, if I can, I'll use small aircraft or else I just drive. I'd rather put up with the longer travelling time than to be treated like crap.

Ravekid said:

This is why I have invested in the coal ETF. If Israel drops the bombs on Iran, we may have no choice but to use coal for gas and nuclear power for electricity. I would look for an electric high speed rail network to form almost overnight.

Click to expand...

Coal for gas and Nuclear for electricity is the answer.

Goodbye

Peak oil already sucks. It's going to get much worse. Losing convenient air travel is just the tip of the iceberg. And no, gasified coal is not going to make a dent in the problem. Grin and bear it, if you can.

Another Airline Near Brink of Bankruptcy
By Tammy Mori

Another interisland carrier is threatening to file for bankruptcy protection.

It's the latest in a string of bad news for the airline industry, and could add to the travel concerns in Hawaii.

Mesa Air Group, the parent company of Go told federal regulators that bankruptcy depends on the outcome of a legal battle with Delta airlines.

Mesa has a contract worth about 20 million dollars a month and now Delta wants to terminate that contract.

If Delta moves forward and terminates its contract with Mesa air group, Mesa said in a federal filing that it stands to lose up to $960 million in revenue over the next four years.

"The financial bloodbath we are seeing in the airline industry right now, there's either going to have to be a change of the rules or fewer airlines left," states Peter Forman, an aviation analyst.

According to airline experts, like Peter Forman, Mesa air group may only have itself to blame for losing its contract with Delta.

"Last year they lost nearly half of their pilots to attrition so that's part of the reason they couldn't complete as many flights as Delta wanted," explains Forman.

On top of that, money is bleeding out to rising oil prices and stacking legal battles.

The court ordered Go to pay hawaiian airlines an $80 million settlement.

And a lawsuit with Aloha Airlines is just around the corner.

In an interview with Mesa airgroups CEO last month, John Ornstein admitted that a bankruptcy filing could be in the horizon.

"Nothing is inevitable. Clearly it's going to be a little tricky," he said by phone.

"We already have a real shortage of interisland traffic. There's a lot of days where most of the flights are selling out, so if something happened to go, we'd really be in a bind here in Hawaii," adds Forman.

But industry experts believe even if mesa airlines filed for bankruptcy protection.. its services in Hawaii would be the most protected because this is one area where mesa continues raking in the money.

"This is about the easiest market you can imagine making money right now both Go and Hawaiian keep raising their prices and they keep filling up the airplane. We haven't seen the end yet, I think it's going to go even higher," says Forman.

Mesa Airlines did not want to comment today since it is in the midst of a legal battle.

The hearing with Delta is scheduled to get underway next week.

http://www.khon2.com/news/local/19205084.html

May 23, 2008
9 Airlines Face Threat of a Credit Downgrade
By MICHELINE MAYNARD
In the latest sign that the outlook for the airline industry is darkening, Standard & Poor’s Ratings Services on Thursday placed nine big airlines on CreditWatch with negative implications, meaning that it was likely to cut their debt ratings.

A senior credit analyst with S.& P., Philip A. Baggaley, said the action was taken because of “potential severe financial damage” that could result from record fuel prices. In total, 10 airlines, including all the major carriers, are now under the CreditWatch negative designation.

The price of jet fuel has risen 82.5 percent in the last year and 10 percent in the last month, making it the single biggest expense for the airlines. If the price does not moderate, Mr. Baggaley said one or more of the major airlines might need to seek bankruptcy protection by 2009.

“All of them have a decent amount of cash,” he said, “but with the scale of losses that may occur, they could burn through that very quickly.”

S.& P.’s action affected American, Continental, Delta, Southwest, United and US Airways among the biggest carriers, and AirTran, Alaska and JetBlue among the smaller ones. Northwest was put on CreditWatch negative after it announced plans in April to merge with Delta.

Executives at the ratings agency plan to meet with officials at each airline and will act on debt ratings quickly.

Airlines have started a series of fare increases, fuel charges and new fees in the last few months. On Wednesday, American said it would charge some passengers $15 to check their first bag. None of the other airlines have yet followed suit.

However, Mr. Baggaley said the airlines risk alienating passengers more by the fees than if they simply raised ticket prices. This is only the third time that S.& P. has placed so many airlines on CreditWatch negative. The first was in 1992 during a series of price cuts that led to fare wars. The second was after the September 2001 attacks, when airlines grounded planes and laid off more than 100,000 employees.

Mr. Baggaley said he was concerned that if carriers filed for bankruptcy again, some could ultimately be forced to liquidate because they have already reorganized and have little more to trim.

“What is in some ways scarier about this situation is that most of the airlines have relatively few unencumbered assets,” Mr. Baggaley said. “If they go through their cash, there’s not much to fall back on. They’ve cut costs and restructured so if they go into Chapter 11, there’s a greater risk they might not come out.”


http://www.nytimes.com/2008/05/23/business/23air.html?_r=1&dlbk=&oref=slogin&pagewanted=print

The end of the budget airline?

Dan Milmo in Houston guardian.co.uk, Friday May 23 2008

The list of bankrupt airlines is growing by the week, but the biggest casualty of the oil squeeze in the airline industry could be the cheap fare and the holiday plans of a generation weaned on affordable air travel. A decade of low ticket prices has fuelled the Tallinn stag do and made Ryanair an unlikely linchpin in the market for continental second homes. It has also led to a 200% growth in UK regional airports. But airline executives warn that fares have to rise.

This raises serious questions over the business models of two of the most financially robust carriers in the world: Ryanair and easyJet. The dominant players in the European budget airline market rely on low fares to pack their aircraft, wringing profits out of passengers by charging for add-ons such as luggage check-in and hotel bookings.

British Airways, Air France-KLM and Australia's Qantas are hoping to trade their way out of trouble by raising fares, but that approach is anathema to Ryanair and easyJet. According to analysts at the investment bank Credit Suisse, they have to take action.

"Without the benefit of fuel hedging, and in the absence of mitigating action by management teams, we do not believe that any airline can be profitable in the medium term — not even easyJet and Ryanair," said Credit Suisse, acknowledging that Ryanair will slip into a loss if oil trades at $140 a barrel. Even Michael O'Leary, the combative chief executive of the Irish carrier, was forced this week to concede that the oil price was "really hurting".

EasyJet admits fares will have to rise, but says it will still be cheaper than competitors. "In the long term no industry can exist if it doesn't cover its costs. However, that cost is very different for different airlines and it is incumbent now on all airlines to look at all areas of their costs base to see where other costs can be axed to keep fares low," said Toby Nicol, easyJet's director of communications.

Some analysts are concerned that budget carriers will suffer because even if their fares remain comparatively low — Ryanair and easyJet have cost bases far leaner than those of BA or Air France-KLM — they will still be too expensive for consumers living in a parlous economic environment. So far, neither carrier is reporting a decline in demand, but the doubt remains that leisure flying will become an expendable luxury.

Willie Walsh, chief executive of BA, said this week that the cheap flights era was coming to an end, with bargains such as the £39 lead-in fare to disappear. EasyJet, waiting for rivals to go bust so it can inch up fares, believes it can keep prices at an alluring level.

"EasyJet's average fare last year was £43 one way, before government tax, so the era of the £39 fare is actually still very much alive and well. BA may no longer be in a position to offer such low fares but easyJet still is," said Nicol.

At a lunch in Texas this week, Walsh congratulated oil industry executives on their recent good fortune, and the sarcasm was palpable. BA and carriers around the world are facing extinction due to soaring fuel costs, while oil companies reap the benefits from prices of more than $130 a barrel.

BA is one of the few airlines strong enough to survive, but Walsh made clear on a visit to Houston, Texas, the global energy capital, that passengers will have to share the pain. "We are going to see fewer airlines out there. The [fare] pricing model will change to reflect the reality of industry costs," he said, warning that higher fares were inevitable. BA is expected to raise fares by at least 4% over the next year, say analysts.

Fuel accounts for about a third of airline budgets and the huge rise in the global oil price has floored an industry that had barely recovered from the terrorist attacks on September 11 2001. Having slashed their cost bases to a profitable level, the recent fuel increases have put many airlines under water again.

The boss of Air France-KLM warned this week that the structure of the industry will change "profoundly" over the next 12 months as the oil price bites. Airlines are already being picked off from the lower rungs of the industry. Over the past six months, four carriers operating UK flights have collapsed: business class airlines Eos and Maxjet, Oasis Hong Kong Airlines, and South Africa-based Nationwide Airlines. Even the established carrier BMI reported a 50% fall in profits to £15.5m yesterday, while Silverjet's shares were suspended amid funding problems.

These problems and the collapse of a further three US carriers were due mainly to the rocketing cost of fuel. Brian Pearce, chief economist at the International Air Transport Association, the global airline body, believes many carriers are too weak to cope.

"Airlines have had two years of profits and decent cash flow but normally, as was the case in the 1990s, they have four years of good trading when the industry is at the peak of its cycle. That allows airlines to protect their balance sheets. It is looking much more fragile this time."

Struggle

Although BA last week celebrated record pre-tax profits of £883m, it warned analysts it might struggle to break even over the next two years. With £1.8bn cash and a relatively low debt, it hopes to be better placed than others to ride out the storm. Nevertheless, every $1 rise in the oil price knocks £16m off its profits. If oil stays at more than $125 a barrel, its operating profit will be wiped out. EasyJet is in a similar position, with Ryanair not far behind.

Compounding the problem, consumers are having to spend more on petrol and domestic fuel, making them less able to afford higher airline fares.

"Since we have seen this 50% increase in jet fuel, the US economy has collapsed around our ears and global passenger revenues have slowed down sharply," said Pearce, pointing to a 1% fall in business passengers for all airlines in March. Fuel hedging, whereby airlines buy fuel in advance at a fixed price, is also providing diminishing shelter. BA has bought about two-thirds of its fuel at $86 a barrel until next March, but it has little cover thereafter.

The best hope is that oil is in the grip of a speculative boom. Walsh says US oil consumption fell 7% in February, equivalent to a 2% slump in global demand, but the oil price went up.

But every cloud has a silver lining: the oil boom is turning BA's Heathrow-Houston route into a very popular one.


http://www.guardian.co.uk/business/2008/may/23/theairlineindustry.ryanair/print

Silent Spring For Aviation
by BWK ~ May 22, 2008
Silent Spring For Aviation…

My recent flight down to Texas offered some perspective on the future of aviation. And that future is bleak.

No, I will not regale you with a story of lost baggage or rude gate attendants. Actually, the flight was fine. I flew Pittsburgh to Charlotte, and then Charlotte to Houston. From my perspective, there were no travel problems. Really, even the Transportation Security Agency people in Pittsburgh showed some courtesy. That part of flying was fine.

But I’m sure glad that I am not paying for the gas for these jets out of my own petty cash. Wow! Fuel costs are killing the airlines. Almost every flight in the skies these days loses money. It does not matter how few peanuts they put in the little bags. At the very least, 20% of airline seats are going to go away within the next six months. Really, some airlines cannot ground their inefficient planes fast enough.

In the future, legacy carriers that fly packed aircraft between distant hub cities might eke out a small profit on each flight. That’s with much higher ticket prices. But the shorter hops are money losers. So the current situation cannot last. At this rate, small towns are surely going to lose air service.

It means that 70% of the nation’s airports are at risk of losing most or all of their airline service. And you have probably noticed that the U.S. passenger rail system is mostly gone, except for a few corridors.

About 45 years ago, Rachel Carson wrote a book called Silent Spring. The book sounded an alarm about the impact of man-made chemicals on the natural environment. Carson’s “silent spring” referred to the widespread destruction of bird life due to toxic poisoning and destruction of habitat.

It is time for turnabout. Mother Nature is taking her revenge in the form of high-priced oil. The cost of jet fuel is soaring. The airplanes of the world are starting to get grounded. The skies of the future will not be so crowded. Flying will cease to be an option for many tens of millions of Americans — maybe for hundreds of millions.

In the future, only the most efficient jets (like Boeing’s new 787 Dreamliner) will ever go wheels up at the end of a runway. Ticket prices will be high. How soon will these things happen? I think that we will experience our first silent spring as early as next year.

Will U.S. Energy Policy Makers Get Energy Smart?

The next U.S. president had better get really smart on the U.S. energy policy, and I don’t mean dusting off some loser playbook filled with failed energy policies from the 1970s (or the 1980s or 1990s or 2000s, truth be told).

I have read what passes for energy policy on the Web sites of all of the presidential candidates. None of them really gets it. None of them. It’s mostly pandering and rambling.

“Energy” is just another issue about which the candidates say as little as possible, in as plain vanilla a way as possible, while trying to sound profound. There is no original thinking. There is no courage to tell the American people what they need to hear, as if people don’t already know a lot of it. There is not even any acknowledgement of honest reality.

The U.S. needs to get its energy act together. If we screw up energy, most other things will follow the downward spiral. Call it silent spring on steroids.

Until we meet again…

Byron King

http://www.energyandoil.com/silent-spring-for-aviation

Fuel costs kill off a US airline every week

James Doran in New York The Observer, Sunday May 25 2008

Airlines in America are closing down or going bankrupt at a rate of one a week as the rocketing price of oil forces the industry to its knees and calls into question the very viability of commercial air travel.

In Britain, analysts say low-cost carriers such as EasyJet and Ryanair could be hammered. Andrew Fitchie, analyst at Collins Stewart, said: 'The no-frills airlines are in the eye of the storm. They will have to slash capacity, stay on the tarmac or look at merging. There will be casualties.'

According to the US Air Transport Association (ATA) six airlines have been forced to close down since the beginning of April, while another has filed for Chapter 11 bankruptcy protection.

'There has certainly been an acceleration of shutdowns in the past month or so,' a spokesman for ATA said, adding that 10 carriers had been forced to close since 25 December. 'This is all to do with the cost of jet fuel. Carriers simply cannot afford it.'

And as analysts predict that the price of oil will continue to rise, there are fears that the worst is yet to come. 'There has to be a fundamental change in the economics of operating commercial aircraft,' said an ATA spokesman.

ATA claims that every dollar added to the cost of a barrel of oil adds $456m a year in jet-fuel costs for US airlines. The ongoing increases in the oil price over the past year have sent the price of jet fuel soaring by more than 65 per cent in just 12 months.

Eos, a business-class-only transatlantic carrier, was one of the more high-profile companies to go bust, filing for Chapter 11 on 26 April. Just four months earlier, Eos rival Maxjet also threw in the towel. Aloha Airlines, a regional carrier based in Hawaii for more than 60 years, closed on 31 March. Other carriers that have gone bust, such as SkyBus, Champion and Air Midwest, have all cited increasing jet-fuel costs as a primary reason for going out of business.

Ray Neidl, airlines analyst at investment bank Calyon, said the business model used by all airlines had become unworkable. 'The industry is at a crossroads with current oil prices, which are up 60 per cent since last October and now account for about 40 per cent of [airline] operating costs. We believe that a minimum of 20 per cent of domestic capacity must be removed, the equivalent of the domestic capacity of US Airways, Continental and Frontier Airlines combined.'

· The airline crisis is claiming casualties in the UK too. On Friday shares in Silverjet were suspended on the Alternative Investment Market after the business-class-only airline admitted it was unable to secure funding to carry on doing business. Silverjet is also a victim of soaring fuel prices. With oil at $135 a barrel, fuel costs for a single transatlantic trip on a Silverjet B767 are estimated to have jumped to £44,000 from just £28,600 a year ago


http://www.guardian.co.uk/business/2008/may/25/theairlineindustry.usa

Fine Chartreuse, you take the 3-day bus trip, I'll be on a plane at my destination in two hours. Have a good time! Then tell me who's more brain damaged.

You actually believe the garbage about greenhouse gas? And global warming? That's sheep mentality. I thought you were smarter than that.

It strikes me that an end to "air travel for everyone" might have a positive side. Recall all the fears that some bird flu infected Chinese peasant might bring the disease into the US or Canada via some short plane ride?

Now with prices going up so much, that scenario becomes less likely, as with fewer direct flights, more expensive flights, that such a sick individual is likely to have to make an overnight stop somewhere before trying to board their overseas flight leg. And with such a rapidly progressing disease, that overnight stop could be long enough for that person to be showing syptoms and stopped from making the flight that would bring the illness to our shores.

So look on the briught side of the situation. Those people who are manipulating fuel prices higher for their own gain may have staved-off the much feared introduction of human-based bird flu or Ebola to our shores.

WW

May 26, 2008

Pressure grows on airlines as fuel suppliers demand cash in advance

Carl Mortished and Amanda Andrews
Airlines are being forced to pay cash in advance for jet fuel as the major oil companies tighten the screws on an industry that is being crushed by an extraordinary surge in the price of crude oil.

Sources within the airline industry indicate that credit is being denied to most of the leading American carriers and the practice is moving to Europe and Asia. So uncertain is the cash solvency of the industry that jet fuel suppliers insist on prepayments into special bank accounts.

A credit controller at a leading European multinational oil company told The Times that the oil industry was moving to jet fuel prepayment. “It’s common in the US and it is moving to Europe. We have been moving to prepayment since Swissair went bust.”

The need to put up money before delivery of fuel is a huge financial burden that has been shifted from the oil companies to the airlines. According to John Armbrust, a US jet fuel consultant, the oil industry had $5 billion (£2.5 billion) of jet fuel credit outstanding to airlines before the 9/11 terrorist attacks. Now they are demanding that airlines leave cash on deposit.

“The airlines can’t afford it. Traditionally, oil companies extended credit for 14 or 21 days and some as long as 30 days. Now, most American airlines are on prepay. South West is one of a few likely to still get credit.”

The extent of the cash squeeze was highlighted last week when American Airlines said that it would charge $15 per bag checked even as it revealed plans to shed 75 aircraft, shrinking the airline’s capacity by 12 per cent.

The price of jet fuel has risen by 60 per cent since January and American Airlines paid $665 million more for fuel in the first quarter of this year than in the same period of 2007.

The credit crunch is likely to worsen and a number of financial institutions will fail, according to research from Atradius, the credit insurance group which conducted a global survey of its customers’ views of the financial outlook. Although Atradius said that companies expect the number of failures to be small, about 65 per cent expect there to be failures.

The group added that direct exposure to sub-prime lending is higher in Europe than in the United States even though the bulk of the sub-prime mortgage defaults are in the US and many of the securities these loans are packaged into would have originated from US-based mortgage companies.

“Some explanation for this may be investments by European companies in US securities offering higher returns and more frequent use of secondary financial markets to securitise receivables by European countries,” it said.

Atradius added that only 12 per cent of companies across the world do not expect an economic slowdown in the next year. In Britain, more than 90 per cent of companies surveyed expect a slowdown, the highest percentage. About one in six companies expects a slowdown of only the national economy; a quarter expect a slowdown of the global economy and half expect a slowdown of both. The expectation of a slowdown is also high in Mexico, the United States, Spain, Italy, France and Belgium and lowest in Sweden and the Netherlands.

Atradius found that larger companies are more likely to have been affected by the credit crisis. Although fewer than 30 per cent of small companies reported an impact, almost half of all large companies (with more than €1 billion annual gross sales) said that they had felt the credit-crisis pinch.

Companies operating within the energy industry have been especially affected, but those in the healthcare and services industries reported a relatively low frequency of impact.


http://business.timesonline.co.uk/t...le4004371.ece?print=yes&randnum=1211752823533

May 18, 2008

British Airways will ground part of its fleet over rising fuel cost
Dominic O’Connell
British Airways plans to ground part of its fleet from October to cut costs and stem potential losses caused by the crippling price of fuel.

Confirmation of the move, from chief executive Willie Walsh, comes as analysts warn BA may only break even or worse for the next two years, despite having reported one of its best year’s trading last week.

The sudden reversal has been caused by rapidly rising fuel prices – jet fuel went through the $1,300-a-tonne mark last week – and sluggish demand.

BA has already selectively slashed fares across the Atlantic, offering returns to New York for £249, a base fare of £30 once taxes and fuel surcharges are stripped out. “It is a bloodbath,” said one industry executive.

Scheduled airlines rarely ground aircraft, preferring to keep their expensive fleets in the air, although Ryanair has kept planes on the ground during slack periods. Walsh said: “You should certainly expect us to do that this winter.”

The airline would park its oldest, least fuel-efficient aircraft. Walsh said this would be likely to include its older Boeing 747s, 767s and 737s.

BA last week reported strong annual results for 2007-8, hitting its long-held goal of a 10% profit margin, paying staff £35m in bonuses and the first dividend in seven years.

Walsh did not take his £700,000 bonus, saying it was not appropriate in the wake of the chaotic opening of Heathrow’s terminal 5.

The fall-out from the T5 debacle will dent BA’s figures this year. The company has guided analysts to expect a hit of a further £40m-£50m on top of the £18m in the last financial year.

Half of the hit would be in extra costs, half in lost revenue. Walsh told analysts that T5 was working smoothly, although the moves of additional flights to the terminal would still be later than first planned.

Fuel will be the biggest headache for BA. If oil continues at $120 a barrel, BA’s profits could be wiped out this year. Chris Avery, analyst at JP Morgan, said that if oil remained above $110 a barrel, “investors need to be very conscious that BA could make a loss for one or both of the next two years”.

BA is hoping tough times will help it take the lead in industry consolidation. Walsh said that he had resumed negotiations with American Airlines and Continental Airlines of the US with the aim of creating a transatlantic alliance.

Previous attempts have been rebuffed by American regulators, but Walsh said he was hopeful the difficult trading environment would clear the way for a deal. Pilots begin a legal challenge to BA’s plans to start an “airline within an airline” tomorrow. The company wants to start flights between Paris and New York next month with a new subsidiary called Open Skies.

The British Airline Pilots Association does not oppose the services, but is against the planned use of flight crews from outside the main BA pilot group.

Pilots voted in favour of striking over the issue earlier this year, but they have put the action on hold pending this week’s High Court challenge.

http://business.timesonline.co.uk/t...le3953811.ece?print=yes&randnum=1211765340816

Martin said:

Our species’ historically brief fling with flight has been fun, educational, and enriching on many levels to those fortunate enough to benefit from it. Saying goodbye will be difficult.

Click to expand...

That's what I was thinking. "Well, that didn't last long..."

Air France-KLM intensifies airlines' fuel gloom

May 23, 2008

Air France-KLM intensifies airlines' fuel gloom
Adam Sage in Paris
Airline executives forecast bankruptcies, job cuts and increased ticket prices yesterday as Air France-KLM plunged the industry into further gloom with a warning that its profits would fall by a third under the weight of rising fuel costs.

Shares in the Franco-Dutch carrier were marked down 10 per cent to €16.74 amid fears that its fuel bill would be €5.7 billion (£4.5 billion) this year, up from €4.6 billion in 2007.

The warning from the world's biggest airline by revenue provoked fresh turbulence in a sector already unsettled by Wednesday's announcement from American Airlines that it would charge passengers to check in luggage in an effort to generate additional revenue. With Qantas, the Australian flag carrier, putting up the cost of international flights by 4 per cent and Japan Airlines also set to raise its fuel surcharge, executives predicted fewer passengers and a bleak outlook for the industry.

Philippe Calavia, Air France-KLM's chief financial officer, said: “For airlines which are fragile and which don't have a fuel-hedging policy, we must expect massive restructuring. We expect a big downsizing and there's a real risk that capacity will contract.”

In a comment that appeared to highlight Air France-KLM's appetite for further expansion, Mr Calavia said that smaller carriers would be forced to merge with “big global groups” to stave off the threat of bankruptcy.Mr Calavia's fears were echoed by Finnair, which said profits would slump as its fuel bill rose this year to €600 million from €440 million.

Air France-KLM insisted it was better equipped than most of its competitors to handle an 82 per cent rise in the cost of jet fuel over the past 12 months. Mr Calavia said the group had a young and fuel-friendly fleet of aircraft and was covered for 78 per cent of this year's fuel requirements at a price of less than $80 a barrel as a result of a decade-old hedging strategy.

Operating profit for the 12 months to March rose 13 per cent to €1.41 billion, but net profit fell 16 per cent to €748 million after Air France-KLM reported a fourth quarter loss. This followed a €530 million provision for potential penalties over an antitrust inquiry into the air freight sector.

The carrier predicted a drop in 2008-09 operating profit to about €1 billion on the basis of a crude oil price of $120 a barrel. That forecast looked optimistic as the price reached $135.

The group said it would fail to meet its target of an 8.5 per cent return on capital by 2009-10 as a result of the cost of fuel. The return for the year to March was 7.1 per cent.

http://business.timesonline.co.uk/t...le3987539.ece?print=yes&randnum=1211766754149

This thread is starting to be depressing. Gets worse with each post...