Gas prices put a pinch on weekend travel

Question of the Day

Is it still considered bad form to talk politics during a social gathering?

View results

“The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak U.S. economy,” said Gerard Arpey, chief executive officer of AMR Corp., parent company of American Airlines.

Industry observers were not surprised by the announcement, as airlines continue to seek ways to increase profitability.

“The announcement is simply a manifestation of the tremendous pressures the industry is feeling right now, particularly due to high fuel costs,” said Elizabeth Merida, spokeswoman for the Air Transport Association (ATA) , a trade group that represents airlines. “We’re seeing carriers unbundling their services in an effort to raise revenues.”

Fuel makes up 30 percent to 50 percent of an airline’s costs. Every penny increase in the price of a gallon of oil means $195 million in additional annual costs for the industry, according to the ATA, which expects passenger traffic to decline 1 percent this summer largely because of the sluggish economy.

Comments
blog comments powered by Disqus