March 20th, 2012
06:12 PM GMT
Share this on:

London (CNN) – For the airline industry, it seems barely does one crisis subside than the next rears up. No sooner has the European debt debacle gone to the back-burner - taking away one of the biggest threats to economic growth - than oil price rises become a concern. And it's a worry as big, if not bigger, than the debt crisis.

All the forecasts have been done on the basis of $99 to $100 per barrel of oil. Prices are now more than $120 for Brent and that is hitting airlines hard. For most airlines, more than 30% of revenues are now going on fuel. In some cases, it is the single biggest component.

Is oil the new Greece?

Tony Tyler, head of IATA, the organization representing aviation, describes airlines as “weak but still profitable.” With prices for oil having risen more than 30% he says airlines are suffering a “double hit.” As ticket prices go up, people travel less. There is a “hit to the revenue line and the cost side,” he notes.

Which is why IATA has downgraded profits for the industry by $500 million to $3 billion in 2012. The $3 billion figure may sound a lot - until you realize it is against revenues of $630 billion. In other words, it's a margin of just 0.5%. By any definition that is a pathetic return on capital, resources and investment.

Saudi Arabia sending more oil to U.S.

As Tyler puts it, “a small shock will mean losses across the globe." No individual airline is immune from this; even the gulf carriers, often (inaccurately) said to benefit from cheap fuel. Most times they pay the going rate like everyone else. And everyone has to fill up their planes overseas; you can’t tanker vast quantities of fuel to get there and back on longer routes.

The airline industry is being hit by taxes on tickets, high fuel prices and for flights to Europe by the Emissions Trading System. No wonder Tyler says the industry is merely “hanging on by its fingernails, but won’t take much to send back to losses.”



soundoff (21 Responses)
  1. benita wheeler

    we have to come up with long term solutions that works for the oill companies as well as the consumers.

    March 21, 2012 at 3:02 am |
  2. Floyd Burgoz

    This will also prevent many people all over the world from even considering a vacation via Automobile. It hits harder at the pump during vacation season because Fuel Stations raise the prices over and above the already high price to make a profit. They can do this because they know you will pay, because no other choice exists when you are in the middle of no where America on vacation.

    March 21, 2012 at 5:29 am |
  3. fred bazzeeda

    meanwhile the big oil companies earn incredible profits.
    ....hmmmmm.....something is wrong with the pendulum, it seems to be stuck on one side only.....???

    March 21, 2012 at 8:29 am |
  4. Jacques De-Ville

    This morning Iranian finance minister claimed that they are going to act against the SWIFT
    sunction by"disturbing" the Gulf Oil expoert in crative ways as from Sunday.... so Obama will not be elected under a USD 250 per barrel Soon a flight ticket from NYC to Paris will be EUR 2000.......

    March 21, 2012 at 11:02 am |
  5. Nuno

    The European debt debacle HAS gone to the back-burner ?????

    March 21, 2012 at 11:24 am |
  6. Bob French

    Good. Maybe the flying stupid will quit crowding planes. You know, like most British, French, and Germans.

    March 21, 2012 at 3:05 pm |
  7. stephen

    I'd say to boycott...Seriously! If America were to gather up and communicate for only one week...boycott! No, fly, no travel, everyone take a holiday for a week at the same time and not use fuel! Even if one third did this for a week even at a time...that would be almost 40 million adults not supporting their wallets!
    I'm down to abut $9.00 a month...ride a bike, walk and don't drive. Sometimes I walk 7 or 8 miles a day instead of riding. Thirty to 50 a day on a bike.
    If I were working for someone...I'd tell them to support the fuel costs or I'd quit! And to make a point...I would "cut my nose to spit my face"! They all know that you DEPEND on the oil for everything! This is why they can do what they want...worse part is the US supports it! I don't, and I won't!

    March 21, 2012 at 4:51 pm |
  8. stephen

    Boycott! Ride a bike...walk! Just don't go...

    March 21, 2012 at 4:54 pm |
  9. marc

    the Iranian regime NEEDS to be dealt with and stopped

    March 21, 2012 at 6:03 pm |
  10. Jeannie

    I'm just plain tired of all this, oil prices going up, jobs getting outsourced, banks repossessing homes, making it tough on everyone except those at the very top. The governments and the very wealthy all agree there is a problem and they are the only ones with the power to do anything about it and yet they do little or nothing while the rest of us struggle. It is all a game to them, a power struggle, a tug of war and we are in the middle of all of it. They all need to trade places with us for a year or so and see how it feels to be on the other end.

    March 21, 2012 at 11:05 pm |
  11. sameh

    Strangest way to the marriage application
    http://upload40.com/12321.html

    March 24, 2012 at 2:21 am |
  12. FB

    Wow..

    March 24, 2012 at 3:01 am |
  13. bedir çayı 43

    In ancient times, prevented price increases
    Oil, baenzin, Brent $ 120
    too expensive
    solution, Aizanoi Where is Aizanoi
    43 Badr tea.....Bedir çayı 43

    March 24, 2012 at 11:08 pm |
  14. sameh

    Children enchanted miracle Hallelujah
    http://www.elearning-directory.com/arabic-see2

    March 25, 2012 at 8:18 am |
  15. Rodolfo

    We all know oil its a non-renewable resource, someday there will be no more oil in the planet. What are the long term planes of the airline industry and aircraft industry, as boeing and airbus???

    March 26, 2012 at 10:03 pm |
  16. Ndudim

    sort of they put a cap on it, from what I know, and it's stopped but lerappntay it could start up again since the cap is a somewhat of a temporary fix. I'm not exactly sure if it's completely stopped or if some is still leaking out but from what I know, it's mostly contained.

    March 28, 2012 at 9:08 pm |
  17. Carlo

    Условия вступления в Oil&Energy Club:-Contact your travel mgaaner and have them approve your membership.-Then register online here.-Lufthansa will check the registration with your travel mgaaner.

    March 31, 2012 at 2:39 am |
  18. MAGMAN

    It seems we are in the middle of nowhere hopin to be found by gov'ts and big business moguls. they would not find ur way

    April 25, 2012 at 8:39 pm |
  19. TULE

    What would GOD think of us as he has giving us the oil free of charge?

    April 28, 2012 at 10:44 pm |
  20. Tametat s Mershs

    We now the inferior satellite capability that the Malaysia & the serawnding country itsppl a crime not ask for help on behalf of the passenge,changing the story it is unbareable to think what must be happining to the passengers if where they may be
    India and Vietnam retreat or scaled back from particepating ,I think China nows what they are leading is to believe.

    March 16, 2014 at 7:43 pm |

Post a comment


 

CNN welcomes a lively and courteous discussion as long as you follow the Rules of Conduct set forth in our Terms of Service. Comments are not pre-screened before they post. You agree that anything you post may be used, along with your name and profile picture, in accordance with our Privacy Policy and the license you have granted pursuant to our Terms of Service.

About Quest Means Business

Quest Means Business airs Monday to Friday, 1600 New York and 2100 London, and is hosted by Richard Quest.

 

 

 
 
Powered by WordPress.com VIP