Researchers Say Several U.S. Airlines Headed for Failure

At current oil prices, several large and small U.S. airlines will default on their obligations to creditors beginning at the end of 2008 and early 2009, according to a study by AirlineForecasts and the Business Travel Coalition.

The study shows that oil prices of $130 per barrel will increase annual airline costs by $30 billion, while airlines will be able to generate only $4 billion in fare increases and incremental fees.

The implication is that several large and small airlines will end up in bankruptcy, and that some will be forced to liquidate, said AirlineForecasts and the BTC.

“U.S. commercial aviation is in full-blown crisis and heading toward a catastrophe,” the study said.

The report said it was “unlikely” that airlines will have the ability to reduce capacity to levels that will allow all of them to survive. The researchers suggest that the federal government needs to intervene.

“Stabilizing this ailing industry must become a national policy priority,” the report said. “Many members of Congress, federal regulatory officials, state legislators and governors have yet to fully appreciate the devastating impact an oil-crippled airline industry will wreak on our culture and our national and local economies.”