24 July 2008

Airline crisis spills over to entire travel US travel industry

The current airline crisis is only the tip of the iceberg for looming travel troubles throughout the industry, according to travel observers.

Ã¢â¬ÅâœAs the airline fuel crisis intensifies, the risk of major job losses in all travel and tourism sectors and in other airline-dependent industries increase as well,Ã¢â¬~ said Jean McDonnell Covelli, president of The Travel Team Inc.

The Business Travel Coalition (BTC) recently put out a lengthy report on the seriousness of the situation:

Ã¢â¬ÅâœWith airlines gravely threatened, so is our economic well-being in the United States.Ã¢â¬~

The group makes the point that airlines are the primary source for inter-city transportation and are critical to national and local economic development, the flow of human capital, the movement of just-in-time parts for manufacturing and the transport of perishable food and other items the economy depends on.

The failure of just one airline would lead to 30,000 to 75,000 unemployed people with payroll loses of $2.3 billion to $6.7 billion.

But the travel economy is like a deck of dominoes. With the fall of one domino, others would also face problems. Here are some other impacts of airline failures:

ÃƒËœ The US$165 billion meeting market could seriously shrink if larger numbers of meeting-goers could not fly to their destination.

ÃƒËœ Hotels could lose millions of dollars in cancelled bookings.

ÃƒËœ Business travel could be severely disrupted with slowdowns particularly in airline hubs and major cites.

ÃƒËœ The loss of income taxes paid by employees coupled with the loss of airline taxes would further complicate governments already struggling with declining revenues, the study points out.

ÃƒËœ The federal government would be facing more monetary demands from unemployment compensation funds.

ÃƒËœ Domestic tour operators would be hurt by declining volumes of group trips.

ÃƒËœ The US competes with other countries for tourists and with drastically reduced traffic, foreign tourists would be further discouraged to visit this country.

"If oil prices stay anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009," said the BTC study. "US commercial aviation is in full blown crisis and heading toward a catastrophe."

The BTC looks to government to find ways of stabilizing the shaky airline industry to prevent fallout from the rest of the travel industry. They urge government to make it a national priority.

Report by David Wilkening

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Your Comments (2)

Can you say re-regulation?

Even AMR's Bob Crandall is suggesting it. Some minimum level of regulation is necessary as the present domestic airline brain trust can not longer be allowed to mismanage such an important national infrastructure'¦ particularly when the eventual bailout will be on our dime.

By Mike Estill, Monday, July 28, 2008
Relax - It's only a recession!

It is refreshing to see an article such as this. It sets our what we all know but the powers that be on both sides of the Pond have tried to bury. Ladies and gentlemen, I formally declare that we are in a Recession. In the UK we have gas bills - the type we use for cooking and heating - rising by, wait for it - 40 to 60 per cent. Our gasoline is already at the US$2 PER LITRE stage in some areas. IT is time to break out the tin hats and pull the duvet over our collective heads... However others may say a recession is good for business, you down size, get fitter and leaner, sharpen up the offer, see weaker rivals go to the wall, acquire the reduced market share vacated by the failed company. So for a minute, simply accept we are in recession and lets start to get things moving. I'm setting up a series of seminars to see how we can use the lessons of the previous recession in the UK. We have to accept that many of our current industry leaders were simply too young to remember the last real recession. They say that 90 per cent of the BBC staff worldwide is under 50, having let the experienced older hands go. Shweer madness as the birthrarte is plunging downwards and the new blood needed is simply not arouind. Its called demographics. Translate this to other industries and you see the problem. So yes, its going to be tough, people are going to have their lives disrupted, homes taken back by greedy banks, trusted organisations going to the wall and unemployment on the increase. Tghis is a world thing not just the USA, togeter we can make it happen. The real problem is to get our politicians to see what is obvious to the rest of us in the commercial environment! Details of the seminar program are on Http://www.eventandroadshowplanners.com and will,be released on DVD and video streaming immediately after the live seminar has taken place... Julian Bray UK

By JULIAN BRAY, Monday, July 28, 2008