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April 16, 2008

Fuel costs mount pressure on airlines

Fasten your seatbelts and expect a rough ride over the months and possibly years to come as business and, in particular, transatlantic airlines experience financial turbulence. News that Silverjet plc and six other business-only airlines, including Oasis Hong Kong Airlines Ltd and MAXjet Airways Inc., are to either cease operating or require refinancing is adding to growing concerns that a combination of fuel prices, underinvestment, poor maintenance and a more discerning web-centric consumer market is driving the airline industry back into the red.

Rises in fuel costs are cited as the most significant barrier to profitability for the business-only carriers - in January 2007 it sat at $57/barrel, today it exceeds $110 - but years of cost cutting by US carriers is coming home to roost as older fleets are grounded due to their gas-guzzling and the backlog of spare parts previously sold off to raise short-term cash which is now causing delays to essential maintenance.


Silverjet: feeling the pinch

Carriers such as Delta, Northwest and United also missed the boat as foreign operators secured the first wave of new and more fuel efficient airlcraft the Airbus and Boeing 787, so like it or not, they`re stuck with a shortfall of planes, costing more and more to operate and making the destinations they serve less attractive to business and luxury travellers.

European operators, including British Airways and the political football that is Alitalia, face issues of their own making (which in the latter’s instance includes survival after Air France/KLM’s refusal to bid for the ailing national carrier). This leaves new carriers, such as Emirates and Etihad Airways out of Dubai and Abu Dhabi respectively, neither with the baggage that BA for example has to manage, to snap up the business and luxury travelers. As event, corporate and association meeting planners avoid inevitable disruption to customer, delegate or staff experiences out of North America and parts of Europe, emerging destinations deemed as short haul with C21 airport services and the promise of sunshine thrown in, are set fair to take off.

When the global credit crunch and western recessions are complete, the global meetings and events space will have shifted markedly east demanding reinvestment in airport and carrier services alike in the developed economies if market share and commercial carrier viability is to be restored.

For meeting and event planners alike, buyer beware. The customer, delegate or staff experience is likely to be disrupted. If delay and inconvenience is unavoidable, we suggest that time can be passed with some sense of revenge by visiting www.weewilliewalsh.co.uk.



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