The aviation industry is guilty of creating the impression that 'flying is cheap' and will pay the price as rocketing oil prices in the coming months force budget airlines out of business, the Independent reports the joint head of the world's biggest airline has said.
Peter Hartman, the chief executive of the Dutch company KLM, one half of Air France-KLM, said airlines had been wrong in allowing consumers seduced by the arrival of budget carriers such as Ryanair and easyJet to think that the low cost of flying would continue for ever.
He told The Independent that while his own company was insulated against some of the effects of the rapidly rising fuel costs because of its strategy for hedging fuel contracts three to four years in advance, he expected 'bloodshed' elsewhere in the industry as airlines struggle to absorb a 90 percent increase in kerosene prices over the past 12 months.
Mr Hartman said: 'I won't say that the good times are over. But what we did wrong was to give the consumer the impression that flying is cheap. I have just come back from the United States and drivers there are complaining because they are having to pay $4 [£2.04] for a gallon of fuel. Consumers are now realising that fuel is not for free.'
He told the newspaper that he expected the fuel hikes to hit budget airlines particularly hard because they do not hedge their needs and will see the share of fuel in operating costs rise from 13 percent to up to 25 percent. He said the cost of extra fuel to KLM alone this year would be at least €1bn.
Mr Hartman added: 'In the coming months there will be a shake out in many corners of the industry, including some low-cost airlines. We don't know what the reaction of the consumer is going to be in the current climate. But one response could well be faster consolidation within the industry.' |
