Airline Industry Could See Multiple Bankruptcies: Report

The rising cost of fuel could lead to the collapse of the U.S. aviation industry, according to a report released today by an airline research house and an air travel trade group.

All the major legacy airlines will default by early next year on various debt covenants if oil stays near $130 a barrel, the research group AirlineForecasts LLC found. For every dollar in revenue, the airlines now pay 40 cents or more for fuel.

“The implication is that several large and small airlines will ultimately end up in bankruptcy, and of those, some will be forced to liquidate,” according to the report “Oil Prices and the Looming U.S. Aviation Industry Catastrophe,” from AirlineForecasts and the Business Travel Coalition.

The top 10 airlines will spend almost $25 billion more this year for fuel, and the industry as a whole could lose $9 billion over the next 12 months. That will drive fares higher, causing less traffic. If oil prices remain at current levels, it could mean the loss of 85,000 airline industry jobs, and fare increases of nearly 24 percent, the report contends. If oil rises to $200 a barrel, the industry could lose more than 144,000 jobs and ticket prices could rise by 44 percent.

The report argues that the airline industry has become as essential to the nation’s economic well-being as the electric grid. The organizations say they will soon bring specific proposals to Congress and the White House to address the problem but don’t disclose the proposals.