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Could fuel prices kill U.S. airlines?

From left, top executives Doug Steenland of Northwest Airlines, Steven Williams of Maverick USA Inc. and Eugene Guilford of Independent Connecticut Petroleum Association are sworn in Monday at a House hearing on the shaky future of airlines.

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From left, top executives Doug Steenland of Northwest Airlines, Steven Williams of Maverick USA Inc. and Eugene Guilford of Independent Connecticut Petroleum Association are sworn in Monday at a House hearing on the shaky future of airlines.

Pioneers and stinkers lie side by side in the graveyard of failed airlines. For every Pan Am and Eastern, there's an Air South or Skybus. Could some of today's big carriers join the club by 2009?

The airline industry and Wall Street analysts say so, predicting that record fuel prices and a sputtering economy will mean financial disaster if conditions remain the same.

"If the current (fuel) pricing dynamic does not change, our industry will be severely challenged and will continue shrinking — to the detriment of customers, employees and the communities we serve," Northwest Airlines CEO Doug Steenland, told members of Congress on Monday.

UBS analyst Kevin Crissey said in a report last month that historically, when fuel costs shoot up and demand for tickets drops, several airlines lurch into bankruptcy. "If nothing changes for the better ... this will be the case again," he wrote.

Among the 10 largest airlines, he wrote, only Southwest and Alaska aren't at some risk. In his poll of 47 investors, 60 percent said US Airways faced a better than a 50-50 chance of filing for bankruptcy by the end of 2009. Forty-six percent said the same about AirTran.

Airlines expect to spend $61-billion for fuel this year, or $20-billion more than in 2007. Combined losses should be close to $10-billion.

Their game plan is to cut routes and flights after Labor Day and raise fares for the fewer available seats. The big question: how much will demand for tickets drop as prices go up and consumers remain jittery over the economy?

Carriers also will lobby Washington for help, likely stressing job losses and the drag on business that would accompany airline failures.

On behalf of the industry Monday, Steenland urged a House Energy and Commerce Committee panel for legislation to rein in energy market speculators, whom he said have pushed up oil prices to record levels.

Airline experts including Rick Seaney, CEO of FareCompare.com, say predictions of imminent bankruptcies are overblown, with an eye toward a government handout down the road. "No doubt there's posturing going on," he said. "They may have their hand out in case something happens."

Not true, said David Castelveter, spokesman for the Air Transport Association, an industry group. "No one's calling on the government for a bailout," he said.

Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.

Could fuel prices kill U.S. airlines? 06/24/08 [Last modified: Wednesday, June 25, 2008 6:28pm]
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