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Soaring Fuel Costs Carry Risk Of Airline Collapse

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By TED JACKOVICS

The Tampa Tribune

Published: June 24, 2008

TAMPA - The impact of skyrocketing aviation fuel prices could result in massive job losses, declining business activity and reduced tourism as early as the second half of 2008, the Business Travel Coalition, a Radnor, Pa.,-based business consumer group, warned Monday.

With airlines paying about twice as much for fuel this year as last year, fuel costs have increased to more than 40 percent of airlines' operating expenses, which could push air travel far beyond affordability for the majority of the traveling public, the coalition report stated.

"The impact ... goes far beyond charging $2 for a can of Coke or $15 for a checked bag - two consumer annoyances that will have little impact on the airlines' prospects for survival and should not distract anyone from the catastrophe that is looming on the near horizon," the report stated.

If a single major airline failed, the daily travel of 200,000 to 300,000 passengers would be affected, and the failure of multiple airlines would paralyze the country, the report stated.

The coalition report is not alone in predicting dire economic consequences for the aviation industry if some remediation from fuel prices is not found quickly.

U.S. airlines are expected to lose $10 billion in 2008, a loss equal to or larger than the worst year in the industry's history, Air Transport Association President James May told a U.S. Senate committee last week.

"If Congress does not act soon, this country will not have a viable airline industry," May said. "We need action, not more studies or expert commissions."

Without immediate action to reduce fuel costs, the industry faces the economic equivalent of a major blackout this year or early next year, coalition chairman Kevin Mitchell said in a release Monday accompanying his group's report.

Mitchell is among five travel industry officials on a preliminary witness list for a House of Representatives committee hearing Thursday in Washington on "How the Air Transportation Crisis is Hurting Travelers, Entrepreneurs and the Economy."

U.S. Rep. Vern Buchanan, R-Longboat Key, is one of 33 congressmen on the small-business committee who will draw testimony from the travel industry, airlines and business traveler representatives.

"Safe, reliable, and affordable flights are vital to our local tourist economy," Buchanan said in a prepared statement. "Outrageous fuel costs are threatening the viability of some of our nation's airlines and the ability of consumers to travel. Continental recently blamed rising fuel costs for its decision to stop flying to Sarasota-Bradenton International Airport. Other airlines have increased fees and airfare to recoup their losses. Our tourism economy would suffer greatly if people can no longer get here.

"We need a bipartisan effort to lower energy costs. For too long the Democrats and Republicans in Congress have ignored this issue. We need a national energy policy that promotes conservation, invests in alternative fuel and makes us less dependent on foreign oil."

The coalition report listed a range of impact from fuel price increases:

•Employment. The collapse of any of the seven largest airlines would create up to 75,000 job losses. In addition, indirect losses would affect community jobs relying on airports and airlines, and affect local purchases from suppliers.

•Tourism. The geographic impact of airline failures would affect communities depending on air-based tourism.

•Business activity and U.S. competitiveness. An airline failure would lead to declines in business activity, economic development and tax revenue.

Reporter Ted Jackovics can be reached at (813) 259-7817 or tjackovics@tampatrib.com.

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