High Fuel Prices + Major Airlines + Weak Economy = Catastrophe

I came across this paper talking about the effects of record high fuel prices could have on the US Airline industry.

The title actually reads: Record-high Fuel Prices +Major U.S. Airlines + Weakened U.S. Economy = A Catastrophe. I shortened it to save space.

The paper talks about an top energy analyst at Goldman Sachs is predicting that we’ll see oil at $200 a barrel within 24 months. With the price of oil twice what it was just a year ago and 4 times as much as it was in 2000, the price of oil rising is certain to have significant effects on the United States Airline industry.

In 2000, the cost of fuel was around 15% of the average airline total operating cost. Today, it is around 40% of the average airline total operating cost. This is greater than the cost of labor or the cost of plane leases.

Click the more link for a link to the entire paper.

The paper discusses five airlines that shut down since March 2008 – Aloha, ATA, Champion, Eos, and Skybus – because the cost of operating was too high. If you remember, when ATA shut down, it left 2,200 people stranded in Hawaii until the Hawaii Tourism Authority stepped in and spent $500,000 on tickets to get everyone home.

The catastrophe isn’t if one major airline shuts down completely (although the paper discusses how detrimental that could be) but if several shut down within a very short amount of time.

Anyway, I could tell you about the whole thing, but that would sort of defeat the purpose of reading the paper.

Read the paper: beyond_2_coke-1