Air Transport World

US airlines' recurring nightmare: economic shocks, like the current fuel crisis, always hit US carriers the hardest.(ANALYSIS)

WHILE FEW FORESAW THE LATEST economic shock to shake commercial aviation--sustained per-barrel crude oil prices well over $130-one of the consequences of the "fuel crisis" has been all too predictable: US airlines, particularly the big legacy carriers, are taking the hardest hit. The largest and most profitable airlines in Europe, Asia and other parts of the world generally navigate through crises with their bottom lines and service levels intact even if earnings become temporarily modest, but US carriers drop to the depths of economic despair during periods of turmoil.


Industry observers and players believe US airlines are inherently disadvantaged by the realities and structure of the US market and, making matters worse, historically haven't had the management foresight to take measures to lessen their exposure to economic shocks. There is a very real fear that the current crisis could be even worse for the US industry than past problem periods because, in addition to the high price of oil, the biggest factor driving global financial uncertainty is a slow American economy beset by a credit crisis and the declining value of the dollar that has a greater impact on carriers in the US than those based in other regions.

"The current environment will cause more harm [to US airlines] than the period after 9/11," Alaska Air Group Chairman, President and CEO William Ayer recently told analysts and investors, noting that Alaska Airlines spends $147 per passenger on fuel costs alone on an average Seattle-Newark flight.

Boom and Bust How fast things can change. On Jan. 1 of this year, US airlines appeared to be in the best shape they'd been in since the lucrative late 1990s. For the first time in six years, a year was beginning with no US carrier in bankruptcy protection. Better yet, after years of painful cost-cutting, the country's airlines had returned to profitability; in fact, the US was the most profitable region in the world in 2007 with the nation's 10 largest carriers posting cumulative net income of $5. …

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