Soaring fuel costs will hit airlines say BA

Chairman of British Airways (BA), Willie Walsh, is the latest to warn that airlines will go bust this year as a result of rising fuel costs.

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

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

As a result of high fuel costs, Australia’s flagship carrier, Qantas Airways, recently announced it was slashing 1,500 jobs.

25 airlines have gone out of business this year including ATA Airlines, Aloha Airgroup, Skybus Airlines and Silverjet.

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.

Willie Walsh of BA said carriers that struggled to make a profit during the recent sales boom will not survive the worst ever trading environment the industry has experienced.

More airlines will go bankrupt, according to Walsh, and the ones that won’t survive are those that have not been profitable in the last few years.

BA is to ground 20% of short-haul flights with the majority being at London’s Gatwick airport.

Last week, the airline revealed it is in merger talks with Spanish airline, Iberia. Should a deal go ahead, it would create one of Europe’s largest airlines.

Walsh said the proposed merger would help the airlines during the challenging economic environment.

Story link: Soaring fuel costs will hit airlines say BA