Saturday, May 10, 2008

Rising costs reshaping air travel

As jet fuel and fares soar, many are likely to be priced out of flying
By Marilyn Adams and Dan Reed

Record-high oil prices are threatening to ground millions of travelers who have grown accustomed to flying for fun and business during the past 30 years.

Air travel in the USA has grown at a rate five times faster than the population since 1978, when deregulation first allowed airlines to compete by setting their own prices and routes without government approval. Last year, 769 million passengers boarded U.S. airline flights.

But with today's unprecedented jet fuel prices, airline executives and aviation analysts are warning that only extreme fare increases and dramatic cutbacks in flights will enable the industry to cover a 2008 jet fuel bill the airlines' trade group projects will be 44% higher than last year's.

By this time next year, there could be as many as 20% fewer seats available if carriers respond to oil prices well above $100 a barrel by cutting as many flights as securities analysts such as JPMorgan's Jamie Baker are suggesting.

That would be like shutting down a carrier the size of American Airlines, (AMR) the world's largest, which, with its regional carriers, operates 4,000 flights daily. That alone would sharply increase demand and prices for plane tickets.

See: Rising costs reshaping air travel across the USA -

No comments: