End of cheap flights as fuel costs soar

Thousands of families may have to go without holidays as industry experts warn that air fares may rise by 40% due to the soaring cost of oil.

This is in addition to fuel surcharges which have already added up to £872 to the cost of a long-distance flight for a typical family of 4.

The higher charges could have a serious impact on the package holiday sector as over the last 5 years, bookings have plunged by 8%.

Earlier this week, oil prices hit record levels of just under $140 a barrel and some financial analysts have forecasted that they may reach $200 a barrel.

As a result, airlines will have to increase fares by between 30% and 40% in order to cope with soaring fuel costs.

According to the research by investment bank, Morgan Stanley, the rising cost of oil will result in a downturn in the airline industry even worse than the last global recession and even September 11th.

As a consequence of the problems in the airline industry, the report cut earning forecasts for many European airlines such as easyJet and British Airways.

Penelope Butcher, author of the report, said the unprecedented move in crude and jet fuel prices over the last year means that fundamental valuation methods are no longer valid for the airline sector.

Just recently, passengers were warned to expect high ticket prices and having to pay extras including £20 to check-in luggage and £10 to eat on board.

Just this month, British Airways announced the biggest fuel surcharge increase in its history by adding £60 to the price of its long-haul return flights.

Virgin and Air France have also followed suit by announcing higher fuel surcharges.

The airline industry has produced bad news recently after Oasis Hong Kong Airlines 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.

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.

Michael O’Leary, chief executive of budget airline Ryanair, warned that most of Europe’s airlines will go bust if oil prices remain high.

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