Finnair latest airline hit by soaring fuel costs

Finnair, the Finnish national carrier, has announced 500 job losses as soaring fuel costs are forcing the airline to save money. The job losses represent 5.3% of its workforce.

As a result of sky-high fuel costs, Finnair’s fuel bill will increase by £126.7 million ($246.9 million) compared with last year. Oil reached a record of more than $139 per barrel last week.

Yesterday, shares in the airline fell to their lowest level for 3½ years before later recovering.

The airline, which employs nearly 10,000 people, has not confirmed where the job cuts will be made.

Finnair was also hit by a fall in customer demand, with consumers hit by rising food and fuel prices and, as a result, cutting down on non-essential items. This had particularly affected domestic, European and Chinese routes.

Anssi Komulainen of Finnair said demand has decreased and this decrease has accelerated at such a rate in the past few weeks that, together with the price development of fuel, Finnair’s result-making capability has significantly weakened.

Finnair flies to 50 destinations with a fleet of 60 aircraft and the Government owns a 56% stake in the airline.

Record oil prices has meant that many airlines have been struggling. Earlier this month, Michael O’Leary, chief executive of budget airline Ryanair, warned that most of Europe’s airlines will go bust if oil prices remain high.

Last week, the International Air Transport Association (IATA), warned the airline industry faced a grim outlook and passenger numbers would be affected by surging fuel costs and the deteriorating economic situation.

Other airlines struggling are US carrier, United Airlines, who announced dramatic job cuts and said it was to slash capacity on its domestic flights.

Oasis Hong Kong Airlines recently announced it was to stop flying and applied for a voluntary liquidator. US carriers including ATA Airlines, Aloha Airgroup and Skybus Airlines all ceased trading in March.

EOS and Maxjet revealed they would cease flying in May while Delta Air Lines, which is merging with Northwest Airlines, recently announced it would cut 2,000 jobs and reduce its capacity by 10% from 2008 levels year-on-year.

Furthermore, American Airlines said it would lay off workers and slash its domestic flight capacity to 12% after the busy summer period in a bid to keep finances in check.

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