Bring back the Zeppelins!
Posted on 06/06/2008 5:39:27 PM PDT by Lorianne
When Air Canada [AC.A-T] fills up a new Boeing 777 in Toronto with jet fuel for a one-way flight to London's Heathrow Airport, it now costs $68,948.
While the airline is stronger than many rivals, that kind of sticker shock underscores why global carriers are finding it hard to avoid red ink, even with the introduction of hefty fuel surcharges. Monday, the industry itself forecast at least $2.3-billion (U.S.) in combined losses this year.
The International Air Transport Association's (IATA) dim projection is based on a conservative average oil price this year of $106.50 a barrel. The airline sector's 2008 losses would surge to $6.1-billion if oil prices average $122 a barrel – still lower than Monday's $128 but higher than the $105 average so far this year.
“With oil, each increment up makes it harder and harder on us,” said Air Canada chief executive officer Montie Brewer. “Oil was a problem at $80 and $100, and now it's crazy.”
Montreal-based Air Canada introduced fuel surcharges last month on North American flights, and recently raised international fees. On the Toronto-London route, for instance, the one-way fuel surcharge has been boosted to $145 (Canadian) from $112.
Even with new fuel-efficient Boeing 777s, Air Canada's fuel surcharge on the Toronto-London route doesn't cover the one-way fuelling costs of $197.56 for each of the plane's 349 seats.
Air Canada also uses smaller Boeing 767s on the transatlantic service, with the fill-up costing $47,658, or $225.87 for each of the aircraft's 211 seats. The Montreal-based airline's current fuel expenses are based on oil prices of about $130 (U.S.) a barrel.
Analysts estimate that every annual increase of $1 a barrel chops $25-million (Canadian) from the carrier's operating profit. While it's too early to determine whether Air Canada will have a money-losing performance in 2008, the airline posted an operating loss of $137-million in its first quarter.
IATA estimates that global airlines posted a $5.6-billion (U.S.) profit in 2007 – snapping a string of six consecutive years of losses totalling more than $42-billion. The group's membership comprises some 230 airlines accounting for more than 93 per cent of global scheduled air traffic.
“The situation is grim,” said IATA director-general Giovanni Bisignani, who compared the plight of airlines with “Sisyphus – a mythical character whose fate was to constantly carry heavy loads uphill.”
Air Canada, which emerged from bankruptcy protection in 2004, has been seeking to reduce some of the sting of red-hot fuel bills by introducing new fees.
For example, the carrier will start charging $25 (Canadian) for checking in a second bag, effective July 15, for passengers holding lower-fare Tango or Tango Plus tickets within North America. But Mr. Brewer said he doesn't favour following the lead of American Airlines, which plans to slap a $15 (U.S.) levy in mid-June for the first check-in bag on its U.S. flights.
Although passenger loads this summer are expected to dip slightly in Canada, traffic would still be healthy, analysts say. But with little wiggle room left to charge consumers more fees, Air Canada could be forced to reduce its seat capacity this fall, if oil prices stay high, they caution.
In a statement from IATA's annual meeting in Istanbul, Mr. Bisignani said 24 airlines have suspended operations or gone out of business in the past six months, as prices for North Sea Brent crude soared 40 per cent.
In 2002, nearly $40-billion in fuel bills accounted for 13 per cent of the global airline sector's operating costs. This year, expenses for jet fuel will likely surpass $176-billion and gobble up 34 per cent of operating costs, IATA said.
The forecast of a money-losing year marks the fourth time in the past 12 months that IATA has reduced its outlook for 2008. It had revised its profit prediction to $4.5-billion from the original $9.6-billion, before Monday's major revision into the loss column.
Mr. Bisignani urged governments to reduce taxes imposed on the airline industry.
If Saudi Arabia had the reserves available to produce, I think they would already be producing them. $135 /bbl oil is not in their interest. The current and expected future price for oil will encourage more exploration outside of OPEC countries and development of alternatives.
Interesting point
$68,000 / 368 seats = 185.00 per person to fill up that seems like a reasonable profit on 750-1000 tickets
That’s just the fuel cost. It doesn’t include other costs like maintenance, crew, staff, insurance, aircraft payments, etc etc etc etc etc.
Hey this is what the enviro-weenies wanted, can’t do a thing for the airlines, can’t adjust the price of fuel, only a hippie can do that. Hug a hippie today.
Make the politicians take the train.They are the reason for the airlines fuel troubles.
Lets club the maggot infested dope smokin hippie...today
The problem is that the Saudis doesn’t allow ExxonMobil to exploit the oil fields properly.
Like, is that full-serve or self-serve? Do the pilots get cash back from their purchase? Or even a free car wash? Do they have to pay before pumping? Will a SpeedPass work for that fillup?
Neither does Mexico. The biggest problem with most OPEC countries is that they have state owned monopoly oil companies that are the only companies allowed to explore and produce oil and gas in their countries. The "Big Oil" that politicians in Washington like to beat up only controls about 5% of the world's reserves.
Looks like more people will be visiting or doing business by phone.
“Looks like more people will be visiting or doing business by phone.”
I’m thinking that many people will find themselves working from home at least one day a week. If we can find a way that all office workers can telecommute one day a week then we solve traffic problems, save fuel, and oh yeah, reduce that carbon footprint (ducking).
Bring back the Zeppelins!
How about a four day work week (10 hours a day). That would make an impact if it became popular.
many 777 are cargo loads only so money is still there.
Really? That’s an amazing statistic since Boeing just rolled out the first 777 freighter last week.
http://www.aircargonews.net/article.asp?art_id=3386
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