$100-a-barrel oil could cause major airline heartburn
US airlines have weathered terrorism and recession but are now facing another factor that could cause new turbulence: steadily rising fuel costs.
The prospect of what harm $100-a-barrel oil could create was raised by Standard & Poor. The $100 plateau does not seem imminent, however.
“Still, there are enough potential sources of disruption in the flow of oil and refined fuels that some on Wall Street and in corporate suites are contemplating what would happen to the domestic airline industry in the market prices does reach $100 a barrel,” wrote USA Today.
The result could be the liquidation of Northwest and Delta Airlines and bankruptcy for other carriers. Southwest’s continued profit streak could come to a halt.
Carriers would ground aircraft and cut service. Travelers would have fewer choices and higher fares.
Fewer travelers would be willing to pay higher fares not only for air travel but also for gas for their autos. Prices for products and services across the board would rise, adding to inflation.
Oil prices are currently at historically high levels. Oil for some airlines is approaching $80 a barrel. Recent prices were almost 22 times higher than the airlines paid as recently as 2000.
The thought of $100-a-barrel oil “makes me sick,” said John Heimlich, chief economist for the Air Transport Association.
Some observers said while oil might not go as high as $100, it will continue to go up in price.
But others argue prices could also fall.
Prices could fall because of new sources for oil and new technologies to exploit present oil fields, Aaron Gellman, professor at Northwestern University’s Transportation, told USA Today.
Higher prices would inevitably drive away some airline passengers.
“People will still have to travel. They will just have to get used to paying more and traveling less,” predicted one energy expert.
Most observers say alternate fuels and new engine technologies could lead to solutions, but those are still far in the future.
Report by David Wilkening
David
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