[R-G] [BillTottenWeblog] The Peak Oil Crisis: The Half-Life For Air Travel

[Bill Totten]

by Tom Whipple

Falls Church News-Press (May 01 2008)


In recent weeks, airlines around the world have been reporting
substantial losses, declaring bankruptcy or completely shutting down. So
far the losses have been mostly of small airlines, but many of the large
ones have started to thrash around for merger partners. At $3.71 a
gallon, jet fuel is now the single largest expense an airline faces.

In 2000, the airlines fuel bill was $14 billion. It is now pushing $60
billion and climbing. Southwest, the most profitable carrier, recently
announced that this year's fuel bill will be $500 million more than last
year and equal to 2007 profits. During the first quarter of 2008
American airlines lost $328 million; Delta lost $274 million; United
lost $537 million; Continental $80 million; Northwest $191 million; and
US Airways $236 million. Only Southwest Airlines, which did a better job
of hedging its fuel than the others, made a profit.

It is clear we are going to see major changes in air travel shortly.

For some time now, airlines have been eliminating frills, raising
prices, filling the planes and effecting whatever other economies come
to mind. After the summer flying season ends next September, many
airlines are planning to retire five to ten percent of their least
efficient aircraft, thereby reducing their flight schedules by a similar
amount.

Knowledgeable observers are expressing doubts these moves will be
enough. People are starting to talk about $200 oil which implies that
airline fuel costs will double again. Newer aircraft are more efficient,
but the improvements are nowhere near what is necessary to keep up with
surging fuel costs and, as Continental Airlines concluded this week,
there is not enough financial benefit in a merger to keep up with costs.

Airlines are continuing to raise fares - the average ticket is up ten
percent over last year - but at some price point the airlines will drive
away discretionary travel and they will be left with only essential
business and personal travel that is unlikely to fill many planes. On
top of the fuel prices is the current economic downturn which is likely
to start impacting discretionary travel before the year is out. In
short, airplanes simply can't make money while charging affordable fares
at current, much less prospective, fuel prices. The era of 500 miles per
hour travel for most people is nearly over.

There is no obvious way out of this dilemma unless there is a major
breakthrough in the efficiency of aircraft. Fares will continue to rise.
Flights will be cut. Smaller cities will lose their air service. Shorter
trips will be eliminated as being too expensive. More seats are likely
to be squeezed on planes and one manufacturer is even pondering
seat-less planes in which passengers are strapped to boards during the
flight.

Ten or fifteen years from now, air travel is likely to be significantly
reduced; will be patronized by business travelers or the very wealthy;
and will be limited to trans-oceanic or long-distance flights between
major population centers.

Consolidation of the major airlines and the demise of the smaller
regional carriers has already started. After a number of rounds of
consolidation, we will be down to only a handful of national or
multi-national airlines probably subsidized by governments on "national
security" grounds.

While the demise of inexpensive discretionary air travel has
ramifications for many industries, in the first instance tourism is
likely to be hit the hardest.

Ignoring for the minute the likely effects of $4 or $5 gasoline in
California this summer, Las Vegas reports that nearly half of its
tourists arrive by air. To make matters worse, resort operators have
recently spent billions upgrading their facilities to the $300 a night
places that are less likely to attract drive up customers. The same
pattern can be repeated at air-dependent tourist attractions all over
the world.

There is still a remarkable amount of denial in the airline business.
This week Airbus released a forecast showing that the number of large
commercial aircraft will grow from 15,000 to 33,000 in the next twenty
years and that the number of passengers will triple.

If there is to be a long-term future for air travel, it is unlikely to
be with liquid fuel powered turbines driving heavier than air devices.
The US Air Force is currently embarked on a campaign to convince the
Congress to buy it a multi-billion dollar facility to convert coal to
jet fuel and a couple of airlines are busy demonstrating that their
planes will run on biofuels.

While limited use of coal to liquid fuel or biofuels for aircraft may
see limited use, neither of these replacements is likely to produce
enough affordable fuel to keep Airbus's 33,000 large transport jets in
the air twenty years from now.

Over the longer run, the development of hydrogen powered aircraft might
prove feasible or perhaps lighter-than-air dirigibles might be developed
to the point where they can move people and goods efficiently over long
distances. In any case, the day of the ubiquitous kerosene-powered jet
transport which revolutionized travel for many of us in the second half
of the 20th century is likely to be shorter than most realize.

http://www.fcnp.com/national_commentary/the_peak_oil_crisis_the_half-life_for_air_travel_20080501.html


TO POST A COMMENT, OR TO READ COMMENTS POSTED BY OTHERS, please click
on the word "comment" highlighted at the end of the version of this
essay posted at http://billtotten.blogspot.com/