High fuel costs ground an American airline every week
New York, May 24:
Airlines in America are closing down or going bankrupt at a rate of one aweek 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 December 25.
And as analysts predict that the price of oil will continue to rise, there are fears that the worst is yet to come.
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 increasesin 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. Just four months earlier, Eos rival Maxjet also threw in the towel. AlohaAirlines, 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. We believe that a minimum of 20 per cent of domestic capacity must be removed,” he said.
The airline crisis is claiming casualties in the UK too.
On Friday shares in Silverjet were suspended on the Alternative Investment Market after
the airline admitted it was unable to secure funding to carry on doing business.