John Brantley Airport Director

High Fuel Costs Affect Travel Industry-Wide
Editorial: John Brantley,
Airport Director

The price of oil on the world markets continues to rise. As it does, the price of fuel at the pump follows right along. That pump isn't just the one at which you put gasoline in your car. It's also the one that fills the fuel tanks of all of the vehicles that transport people and goods throughout the world. Cars, trucks, trains, ships and planes all are powered by engines that are fueled by oil.

With the price of oil now well in excess of $100 per barrel, fuel has become the greatest cost for many, if not most, airlines, even larger than the costs of people and aircraft. While airlines continue to add fuel surcharges to the price of tickets, those additions have not been able to keep pace with the rise in their cost of fuel. Several airlines attempting to operate on marginal capitalization, including Aloha, Skybus, Maxjet and Eos, have been unable to continue operating and shut down. Credit card payment issues forced another, Frontier, to seek bankruptcy protection and are threatening others. The expanding slowdown in the nation's economy, continued weakening of the dollar, and the subprime credit woes of the financial markets are all having a large impact on discretionary spending, including that for air travel.

The Triangle region is one of the few areas of the country that so far has weathered the storm relatively well. Nevertheless, it has not escaped entirely unscathed. Fuel cost has led several airlines to end or announce intentions to eliminate services at RDU that either aren't sustainable at current fare levels or consume a lot of fuel relative to the revenue they are able to generate. Delta's Los Angeles and Fort Lauderdale services, Air Tran's Orlando service and American's Austin service are some of those. On the other hand, the same issue is leading some airlines to replace smaller regional jets with 70-100 seat aircraft and consolidate some of their major metropolitan area flights, New York in particular, which is a good thing, especially if it reduces schedule delays, as it should.

Another byproduct of the rapidly increasing cost of fuel is the resumption of merger mania among the nation's major airlines. First Delta and Northwest and then United and US Airways have announced their intentions to merge, while Continental has said no to acquiring United and American and Southwest have avoided the fray. It has been said that the only people who favor mergers are attorneys, accountants, financial advisers and investors. Notably absent from that list are consumers, for whom the reduction in competition usually means higher prices, and employees, some of whom are going to lose their jobs.

Also absent from the list are airport operators. Most understand that mergers nearly always lead to reductions in service, less competition and higher fares cause declines in travel, the theory that eliminating airlines means that new entrants will have the opportunity to enter the marketplace is PR doublespeak, and declining travel usually is indicative of a community or region that isn't growing. Depending upon new entrants to step in and become your best friend is not the answer for the long-term as the next fall in the economy usually means stormy weather they won't survive. If merger is the answer each time economic conditions unravel, at some point only one airline will be left. That's not a thought that should bring comfort to anyone. In the words of Willie Nelson's song, when that happens you can “turn out the lights, the party's over”.

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