WASHINGTON (AFP) — The US airline industry is set to crash as record oil prices threaten to push several carriers into bankruptcy, threatening "our American way of life," an industry study said Friday.
"As a consequence of the skyrocketing price of oil, the US commercial aviation industry is in full-blown crisis and heading toward a catastrophe," said a study issued by AirlineForecasts and the Business Travel Coalition.
At current oil prices near 130 dollars a barrel, several large and small US airlines will default on their obligations to creditors, beginning at end-2008 and early 2009, the study said.
The grim industry snapshot comes as US airlines cut fleets, jobs and capacity and add fees as they struggle with spiraling jet fuel costs and a weak domestic economy.
On Thursday, United Airlines and US Airways announced they would start charging 15 dollars for the first checked bag. Both carriers this month became the latest to try downsizing to survive the fuel crisis.
The study shows that oil at 130 dollars will increase yearly airline costs by 30 billion dollars, while airlines will be able to generate only four billion dollars in fare increases and incremental fees.
Recently introduced bag-checking charges and other fees would only yield 1.0-1.5 billion dollars at the industry level.
"The implication is that several large and small airlines will ultimately end up in bankruptcy, and of those, some will be forced to liquidate," the study said.
"Stabilizing this ailing industry must become a national policy priority," the study said, calling on the White House, Congress, federal regulators and state officials to take action.
Every 10 dollar increase in the price of oil results in four billion dollars in additional costs for the 40 passenger-only airlines, according to the study, "Oil Prices and the Looming US Aviation Industry Catastrophe: A Hole In The Transport Grid."
The airlines are on track to spend 30 billion dollars more on jet fuel in 2008 versus 2007, it found, with the top 10 carriers accounting for almost 25 billion dollars.
The study found that with oil prices in the 135 dollar range, the airline industry "could be forced to park upwards of 1,000 aircraft and shed over 80,000 employees, and still not return to health.
"The consequences will be devastating to US jobs, families, businesses, communities and our American way of life."
Oil spiked to a record 139 dollars a barrel a week ago, nearly double last year's 72 dollar average, and settled above 134 dollars Friday.
The surge in oil prices is showing no sign of abating amid strong demand, particularly from developing powerhouses China, India and Brazil, and tight supply.
Some analysts are predicting oil will hit 200 dollars a barrel in the coming months, after crossing 100 dollars for the first time in early January.
To cover oil prices at 130 to 140 dollars, fares would have to go up by 21-24 percent and airline seat capacity reduced by 18-20 percent, the study said.
"Were oil to climb toward 200 dollars, as some analysts predict, the damage escalates and the airline industry could be forced to shrink 35 percent or more," it said.
"Absent direct policy intervention, the likelihood is several airlines will fail."
The Business Travel Coalition said it plans to put forward specific proposals to President George W. Bush's administration and Congress to help alleviate the crisis.
"We urgently need a new energy policy that will give the airlines a fighting chance to survive and recover," the study said.
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