The friendly skies of yesteryear are just not so friendly anymore. Worldwide, airlines are in serious trouble due to fuel costs.
Jet fuel now accounts for 36 percent of the industry's costs, up from 13 percent just six years ago, and could account for 40 percent of the airlines' costs next year. No one is suggesting that the industry is about to go bust - yet - but there is a feeling that things could get much worse before they get better.
While European airlines project seven-fold profit declines to just $300 million, they get off relatively easily, since the Euro is strong and they have a strong presence in emerging markets like China and India. US airlines however, are projecting $5 billion in losses, and the IATA predicts the industry will lose more than $4 billion next year. "The negative impact of the industry crisis is universal," says Giovanni Bisignani, head of the IATA, representing 94 percent of the world's airlines.
But Boeing CEO Jim McNerney believes that the occasional bout of bloodletting accelerates the introduction of new technology: "There are two cross-currents," he says.
"There are the economic difficulties presented by high fuel prices. But the current cutting the other way is: you really do need new technology to lower your fuel consumption by between 20 per cent and 30 per cent."
Funny that he should mention that figure... 20 percent. I seem to remember that Boeing's new low carbon 787 Dreamliner was designed to cut fuel use by just that amount.
Image from Plan59
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