Fuel prices on the rise as airlines hope for brighter future
The first three months of 2010 have seen an improving picture in the air transport industry. Passenger and cargo traffic is starting to grow again and load factors are increasing for most airlines.
Senior Managers at all major airlines are hoping this situation will continue, allowing them to re-instate parked up aircraft and return their companies to profit. However, fuel prices have increased again casting further doubt over the health of the industry.
American Airlines fuel bill for the first quarter was $211 million dollars more than it was for the same period a year ago. This time last year oil was closer to $50 a barrel, but now it has returned to around $80.
It was the previous peak in oil costs that began the serious financial trouble for the airlines in 2008. During that surge in prices air travel dropped as a result of the recession and airlines were forced to cut capacity, slash fares and reduce work forces.
The growth in Europe and North America has already been hampered this year by volcanic ash and the USA’s heavy snow storms. The true impact of the volcanic ash on European, and other global, carriers remains to be seen. What is clear is that it has had a significant financial impact in short space of time.
One positive that may have come out of the last 18 months is the cost cutting measures put in place by the airlines. As the economy picks up this should make these companies healthier and ensure growth is sustainable.
The speed at which the airlines recover is largely dependent on the cost of fuel. If the price of oil stays reasonably constant the companies are better placed to predict their futures and will be more likely to begin large scale recruitment once more.
Source: Reuters
