Transmenu powered by JoomlArt.com - Mambo Joomla Professional Templates Club

In recent weeks, airlines around the world have been reporting substantial losses, declaring bankruptcy or completely shutting down. So far the losses have been mostly of small airlines, but many of the large ones have started to thrash around for merger partners. At $3.71 a gallon, jet fuel is now the single largest expense an airline faces.

In 2000, the airlines fuel bill was $14 billion. It is now pushing $60 billion and climbing. Southwest, the most profitable carrier, recently announced that this year’s fuel bill will be $500 million more than last year and equal to 2007 profits. During the first quarter of 2008 American airlines lost $328 million; Delta lost $274 million; United lost $537 million; Continental $80 million; Northwest $191 million; and US Airways $236 million. Only Southwest Airlines, which did a better job of hedging its fuel than the others, made a profit.

It is clear we are going to see major changes in air travel shortly.

For some time now, airlines have been eliminating frills, raising prices, filling the planes and effecting whatever other economies come to mind. After the summer flying season ends next September, many airlines are planning to retire 5-10 percent of their least efficient aircraft, thereby reducing their flight schedules by a similar amount.

Knowledgeable observers are expressing doubts these moves will be enough. People are starting to talk about $200 oil which implies that airline fuel costs will double again. Newer aircraft are more efficient, but the improvements are nowhere near what is necessary to keep up with surging fuel costs and, as Continental Airlines concluded this week, there is not enough financial benefit in a merger to keep up with costs.

Airlines are continuing to raise fares -- the average ticket is up 10 percent over last year -- but at some price point the airlines will drive away discretionary travel and they will be left with only essential business and personal travel that is unlikely to fill many planes. On top of the fuel prices is the current economic downturn which is likely to start impacting discretionary travel before the year is out. In short, airplanes simply can’t make money while charging affordable fares at current, much less prospective, fuel prices. The era of 500 mph travel for most people is nearly over.

There is no obvious way out of this dilemma unless there is a major breakthrough in the efficiency of aircraft. Fares will continue to rise. Flights will be cut. Smaller cities will lose their air service. Shorter trips will be eliminated as being too expensive. More seats are likely to be squeezed on planes and one manufacturer is even pondering seat-less planes in which passengers are strapped to boards during the flight.

Ten or 15 years from now, air travel is likely to be significantly reduced; will be patronized by business travelers or the very wealthy; and will be limited to trans-oceanic or long-distance flights between major population centers.

Consolidation of the major airlines and the demise of the smaller regional carriers has already started. After a number of rounds of consolidation, we will be down to only a handful of national or multi-national airlines probably subsidized by governments on “national security” grounds.

While the demise of inexpensive discretionary air travel has ramifications for many industries, in the first instance tourism is likely to be hit the hardest.

Ignoring for the minute the likely effects of $4 or $5 gasoline in California this summer, Las Vegas reports that nearly half of its tourists arrive by air. To make matters worse, resort operators have recently spent billions upgrading their facilities to the $300 a night places that are less likely to attract drive up customers. The same pattern can be repeated at air-dependent tourist attractions all over the world.

There is still a remarkable amount of denial in the airline business. This week Airbus released a forecast showing that the number of large commercial aircraft will grow from 15,000 to 33,000 in the next 20 years and that the number of passengers will triple.

If there is to be a long-term future for air travel, it is unlikely to be with liquid fuel powered turbines driving heavier than air devices. The U.S. Air Force is currently embarked on a campaign to convince the Congress to buy it a multi-billion dollar facility to convert coal to jet fuel and a couple of airlines are busy demonstrating that their planes will run on biofuels.

While limited use of coal to liquid fuel or biofuels for aircraft may see limited use, neither of these replacements is likely to produce enough affordable fuel to keep Airbus’s 33,000 large transport jets in the air 20 years from now.

Over the longer run, the development of hydrogen powered aircraft might prove feasible or perhaps lighter-than-air dirigibles might be developed to the point where they can move people and goods efficiently over long distances. In any case, the day of the ubiquitous kerosene-powered jet transport which revolutionized travel for many of us in the second half of the 20th century is likely to be shorter than most realize.

Comments (17)

Subscribe to this comment's feed

Clifford J. Wirth said:

Good article. After global oil production begins to decline this year or next, oil will soon thereafter hit $500 and then $1000 per barrel. Air travel and long distance car travel will become so expensive that it will be out of reach for most people. Buses and ships will still be affordable, but delays in getting reservations will be measured in months and years. Thus, long distance travel will end. Where will you be when the music (travel) stops? It is an important question, because that is where you will stay. Families will be separated permanently. This could all come to pass sooner if there are some disruptions of the flow of oil internationally. It is called Peak Oil, or the energy crisis.

report abuse vote down vote up

May 01, 2008 | url
Votes: +0

Matt B said:

	CJW - Perhaps it won't be such a bad thing when life-styles slow to a crawl (I love the idea of chugging around in a solar-charged golf cart, or whatever). But it's the timeline I'm most interested in... Have a best-guess; when will the airports close? 2030? 2050? 2070? How long have do I have to give the family a European holiday? Thanks in advance and greetings from Down Under.
	report abuse vote down vote up

May 02, 2008
Votes: +1

John Andersen said:

	With this reality staring us in the face, I'm wondering when we're going to get serious about completely revamping our national passenger rail service. Wouldn't now be a great time to start thinking about this?
	report abuse vote down vote up

May 02, 2008 | url
Votes: +8

Nick Outram said:

	Matt, try spending some time over at The Oil Drum: www.theoildrum.com -and watch out for Export Land Model posts by Westexes and Khebab. They are estimating that there will be NO oil exported from KSA by 2032... Nick.
	report abuse vote down vote up

May 02, 2008
Votes: +2

alex kurtz said:

	concise article on an issue that no one seems to be aware of---except Warren Buffett who thinks airlines are money holes.
	report abuse vote down vote up

May 02, 2008
Votes: +0

Jon said:

Why 10 to 15 years from now? If oil production has peaked and the price of a barrel reaches $200 or higher in the near future, won't air travel be significantly reduced in the next few years? I read somewhere about one prominent peak oil alarmist saying that discretionary air travel would be one of the first things to go once the downward slide of oil production begins. His forecast if I recall correctly was around 2009/2010.

report abuse vote down vote up

May 02, 2008
Votes: +2

Jack Leonard said:

Take a look at the market monitor clip on Weekly Business Report on PBS, for an example of a market analyst who has been completely left behind by events. Last July Julius Maltudis an airlines analyst recommended 5 airline stocks on the presumption that oil would fall from about $60 to what I'm not sure. Oil doubled. The stocks are down anywhere from 50 to nearly 70%. Mr. Maltudis is sticking with three of his former recommendations if only oil will go back to $70 or $80. I think we are going to see a lot more of these bewildered individuals in the financial industry in the months to come.

report abuse vote down vote up

May 02, 2008
Votes: +0

Clifford J. Wirth said:

	Hi Matt, I would say that airports would be closed well before 2030. You can look at the data for oil production decline and decide for yourself: http://www.peakoilassociates.com/POAnalysis.html
	report abuse vote down vote up

May 02, 2008 | url
Votes: +0

Clifford J. Wirth said:

	Jon, Yes, you looked at the data and reality and came to the right conclusion: air travel will last a few years. News sources like to provide the facts, as well as a rosy picture about our future.
	report abuse vote down vote up

May 02, 2008 | url
Votes: +0

Tom M said:

I don't doubt that oil will peak but the father of peak oil himself predicted the peak to be Thanksgiving, 2006. Something in human nature is fascinated with end times. In the 1840's, the Millerites predicted the exact day of the end of the world, but the day came and went. More recently many people were worried that computer software would fail in the year 2000, causing power plant outages and riots. Whether or not the same people worrying about Y2K are now worrying about peak oil, they're peas in the same pod.

report abuse vote down vote up

May 02, 2008
Votes: +0

jimbo said:

	indeed, oil has peaked. hasn't it dawned on you that crude oil prices have risen so fast in so short a time? why is the government scrambling to use biofuels? check out the iea and eia data on www.theoildrum.com. this data is used by many governments and businesses around the world, dude.
	report abuse vote down vote up

May 02, 2008
Votes: +0

Geoffrey Harris said:

Hi folks. Seeing that the deep-water off-shore drillers such as Transocean, Noble Corporation, and Diamond Offshore are doing much better than the near-shore drillers (such as Ensco, Global Santa Fe -- recently bought by Transocean too -- etc) and the onshore drillers (Rowan, Nabors, etc), it is clear that it is later in the oil production game than it seems to many people. Expect hard times to be here within a decade. Lates. g

report abuse vote down vote up

May 02, 2008
Votes: +0

Clifford J. Wirth said:

	Hi Tom, Every historical age has a beginning and an end. This is the end of the oil age. It is also the end of modern civilization, which is entirely dependent on oil. Hard times will come in less than a decade.
	report abuse vote down vote up

May 03, 2008 | url
Votes: +0

Matt B said:

Thanks Nick. Though merely a Joe Average, yes I scan through TOD every now and again, looking for either definative proof of PO, or an answer to it (though I'm also not sold on the idea that Man is signifcantly contributing to the planet's natural warming cycle. Nor indeed that a super-being named God built the planet and everything on it - too much thinking does the mind in sometimes, wouldn't you agree?). And to Clifford... You're just plain freaking me out, man! Until the papers start running the headline, "The World is Running Out of Affordable Oil", I simply can't accept that my forty-two years on this planet - not to mention the decades ahead for my kids and their kids - spent calving out a reasonable life-style have been for naught! Surely, the world is not coming to an end any time soon. Surely the smartest scientists, engineers and people-in-power are on the case. Surely!

report abuse vote down vote up

May 04, 2008
Votes: -2

Guy Fox said:

The era of fossil fuel planes and $pace $huttle dinosaurs (model T gas rocket bombs) is over. Amerikan $ociety will need to metamorph to anti-gravitic machines... or devolve back to bicycles and horses. The current paradigm for the air industry is now collapsing in all sectors. Most airlines, and perhaps all airlines, will be completely bankrupt and shuttered by 2011 or 2012. "My kingdom for a horse?"

report abuse vote down vote up

May 04, 2008
Votes: +0

Douglas Brown said:

This article is both long overdue and very incisive about the state of the industry. Congratulations. The level of comments is gratifyingly high as well. For heavier-than-air, a rear-mounted swept wing with canards using counter-rotating propfans (like the Russian backfire) would cut operating costs by more than half. Go to a blended-wing propfan and you're talking a two-thirds reduction in fuel use per unit distance. If PDE's (pulse detonation engines) can get off the test bed, then their use at high altitudes would allow supersonic flight at current per hour fuel burns. (They are too loud for use at low altitudes.) What many of our leaders, political and business, do not seem to grasp is that a fundamental change of infrastructure has to be planned to a fare-thee-well. It also takes a decade or more to implement. That will take national-level leadership of a caliber that we frankly have not had in this country since Eisenhower. I am not sanguine that that will change.

report abuse vote down vote up

May 04, 2008
Votes: +1

GianCarlo said:

	At my company, all non-essental travel has already been cancelled. I predict video-conferencing is going to take off like never before.
	report abuse vote down vote up

May 05, 2008
Votes: +0

Name

Email

Website

Title

Comment

smaller | bigger

Subscribe via email (Registered users only)

I have read and agree to the Terms of Usage.

Add Comment