US airline industry heading for catastrophe 16 JUN 2008: A recent study says "U.S. commercial aviation is in full-blown crisis and heading toward a catastrophe." At current oil prices, several large and small US airlines will default on their obligations to creditors beginning at the end of 2008 and early 2009.
The study by AirlineForecasts and the Business Travel Coalition shows that oil prices of US$130 per barrel will increase annual airline costs by US $30 billion, while airlines will be able to generate only US $4 billion in fare increases and incremental fees.
The report suggests that several large and small airlines could end up in bankruptcy, and that some will be forced to liquidate.
AirlineForecasts and the BTC said it was "unlikely" that airlines will have the ability to reduce capacity to levels that will allow all of them to survive without government intervention.
"Stabilizing this ailing industry must become a national policy priority," the report said. "Many members of Congress, federal regulatory officials, state legislators and governors have yet to fully appreciate the devastating impact an oil-crippled airline industry will wreak on our culture and our national and local economies."
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