Airline industry failures not a blip 

Increased fuel and ticket prices could lead to a decline in visitors

click to enlarge Going Down? Struggling and bankrupt airlines have a negative effect on tourism in Whistler and the rest of British Columbia.
  • Going Down? Struggling and bankrupt airlines have a negative effect on tourism in Whistler and the rest of British Columbia.

Canada is no stranger to airlines going under. In recent years Canadians have seen the end of Canadian Airlines, Canada 3000, Jets Go, and Harmony Airways.

Each bankruptcy has left people stranded, and forced others to make alternate travel arrangements. While you can argue that competition is still healthy between Air Canada and WestJet, keeping fares low for travelers, fewer companies means less choice for consumers.

Airlines go out of business for a variety of reasons. Some, like Canada 3000, couldn’t weather the losses the airline industry suffered after the Sept. 11, 2001 terrorist attacks. Others were mismanaged, couldn’t compete with discount airlines, or were caught with high payrolls and unpopular routes after the airline industry was deregulated and new air carriers took to the skies.

The most recent spate of airlines bankruptcies — four since March 31, including Hong Kong-based Oasis, and U.S. carriers Aloha Airgroup, ATA Airlines, and Skybus Airlines — are largely being blamed on rising fuel prices. Fuel prices were also partly credited for the merger of Delta and Northwest Airlines, as well as the need to pool company resources to stay competitive.

According to the U.S. Air Transport Association, every dollar increase per barrel of oil equals about $465 million U.S. in additional costs for U.S. airlines. Since the start of 2007, the price per barrel of oil has increased from about $72 to $106.

The failure of Oasis was particularly tough, stranding upwards of 40,000 passengers in Hong Kong, London and Vancouver — many of them students attending schools in the U.K.

Some critics says the bankruptcies are a blip, the result of discount airlines flying too close to their margins to be able to absorb a rise in fuel prices.

With fuel prices expected to continue to increase in the short term, less competition for various markets, and other economic factors weighing on the industry, the cost of airline travel is going up — and according Associate Professor Marc-David Seidel of UBC’s Sauder School of Business, the cost will likely stay up.

That’s bad news for the province and for Whistler, Seidel said.

“What we’re seeing is the impact of a losing economy, rising fuel prices, intensified competition, and the increasing demand,” he said. “It’s leading to continual failures, restructuring, and mergers like we’re seeing with Delta and Northwest.

“It’s definitely creating an environment where we can expect prices to go up and travel to go down. Particularly in the context of Whistler and U.S. travel, there’s a strong possibility it will be decreasing even further because the price is higher to get there. The fact the economy isn’t doing that well right now adds to the concern.”


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