The global airline industry is facing a recession far more severe than the slowdown endured after the terrorist attacks of 2001, a leading aviation expert told the Times newspaper. William Swelbar, a consultant to the Massachusetts Institute of Technology (MIT), told The Times that the true health of the aviation market - especially in the US - will not become clear until this autumn, after the key holiday season.
He said: 'Many flights over the next few months were booked months ago, so it distorts the true picture of what is happening. What is for sure is that we are headed towards a severe slowdown. We may already be in a recession.'
Experts and aviation executives have said that record oil prices have fractured the traditional business model of most airlines. Steve Lott, a spokesman for the International Air Transport Association (IATA), yesterday described a 'perfect storm' that is heading for world airlines, to which the American market is especially sensitive.
Mr Lott said that airlines were being squeezed on two fronts: falling passenger traffic and rising costs, driven by the oil price. He said: 'The economic slowdown in the US, the oil price and the weakness of the dollar are all conspiring to hit the aviation market. Americans are going to be thinking hard about whether they can afford to travel. It's not just economy travel. In March, globally, we saw the fastest decline in premium traffic for five years. The outlook is grim.'
One airline executive told the newspaper: 'The problem is that we have already cut the fat - we did so after 9/11. There really are no more jobs to cut. The way forward is to cut capacity, big time. You are going to see planes grounded just to stem the losses and fares are just going to have to go up.'
British Airways, having bolstered its balance sheet after the 9/11 attacks with a £5.9 billion rights issue, is in better health than many rivals, but is believed to be considering ways of grounding about a fifth of its fleet, the Times suggests.
Frances Farrow, chief executive of Virgin USA, said that if airlines fail to raise prices to respond to the increasing oil price, 'everybody is in trouble by the end of the year. Everybody. Something has to happen.' She said that older 'legacy' airlines such as American Airlines and United Airlines run older and less fuel-efficient aircraft, so face an immediate disadvantage.
Last week, American Airlines said it would become the first major US carrier to charge passengers to check in a first bag. And on Thursday, Delta Airlines said that it would offer redundancy to all 3000 volunteers had come forward - despite initially only planning to lay off 2000 workers. The bigger-than-expected response to the offer meant the firm had more flexibility amid soaring jet fuel prices, it said. |
