Fuel Prices and the effect on Airlines

Here are many airline companies that are closing down because of losses incurred. According to May. J. C (2003), the airline industry is in a “perilous condition” because two of the major industries were in bankruptcy, reporting $10 billion losses in 2002. Although some of the airlines who have been able to make profit foresee a very bleak future. May. J. C (2003) goes on to explain that airlines are affected because of many interconnected events that have occurred.
Decline in revenue because of the 9/11 attacks in America, carriers have been trying to reduce costs as much as possible but high fuel prices, increased security, high insurance costs have all combined to give an under performing economy. Fuel prices are increasing because there is high demand but very less supply and with uncertainty of the peace in Middle East and the situation in Venezuela, especially the weather, has caused stocks to reduce. His has caused oil inventories to decline. The airline industry has no surplus cash to depend on, some of them have exceeded their borrowing capacity and even in the future there is no relief.
This situation has continued since then, many airline companies thus building on the cash levels amassed. Costello. T (2006) clearly explains the ripple effect that is caused. If prices of unleaded gasoline is up then extra surcharge needs to be added on every trip a limo or plane has to make. Be it metal shops, EDS Waste or small businesses everybody feels the pinch of the increasing fuel prices. They cannot absorb and suffer losses so what they do is pass it on to customers. Surcharge on jet fuel is even more that is why the customers end up paying a higher price for the ticket.

Due to the effect in Western countries China has an immediate reaction. He Shan (2008) mentions that jet fuel prices in China are determined by many factors such as “factory prices”, “synthesis purchasing cost disparities” and many different “price variables”. China makes price adjustments according to the international prices of oil. Oil price fluctuations in the market have caused China Aviation Oil to increase the oil prices although they are still have not raised their fuel surcharges sufficiently to offset the rising prices.
The main challenge for China is insufficient international flights to alleviate any pressure in the near future. Reed. D (2008) in the article says that high crude oil and refined jet fuel prices have caused U. S. carriers to incur high losses, plenty service cutbacks and even job cuts. The airline companies are doing their best to overcome the losses by grounding planes or even selling them, mergers, buyouts and increasing service charges to the travellers. Routes have been changed or shifted; cheaper contract providers are being brought in, many even have sold ancillary units and business.
Many in flight services and comforts such as meals and pillows have been withdrawn. Companies even began to use technology that helped cut costs on additional labour. All this in an effort to stay afloat and not go bankrupt due to price rise as well as competition that is threatening many businesses. Such a crisis in the airline industry makes even the investor wary making things even more difficult for companies to stay afloat. Many airlines are looking to depend on their liquid assets, but lots of them are running out of options. It is not always easy to stay optimistic for almost a decade.
At the same time there are many companies that have already made some hedge fund planning which is paying them to keep their businesses alive. At the end of it when the crisis is over, only the toughest get to survive, worse things have happened and the airline industry is known to have overcome all crisis, however only time shall tell.
Works Cited
May. J. C (2003). Oil Supply and Prices Statement of James C. May President and Chief Executive Officer Air Transport Association of America before the Committee on Energy and Natural Resources U. S.
Senate Hearing on Oil Supply and Prices, February 13, 2003 http://www. airlines. org/government/testimony/ATA+Testimony+-+Statement+from+ATA+President+and+CEO+Jim+May+on+Oil+Supply+and+Prices. htm Costello. T (2006). The ripple effect of high fuel prices. http://www. msnbc. msn. com/id/12483817/ He Shan (2008). Raised jet fuel price dismays airlines. China. org. cn. http://www. china. org. cn/english/business/240905. htm Reed. D (2008). High-priced fuel scares airlines. USA TODAY http://www. usatoday. com/money/industries/travel/2008-03-24-jet-fuel-costs_N. htm

superadmin (28431)
New York University
DO YOU HAVE A SIMILAR ASSIGNMENT?

Hire an Expert to Help you

Hire Verified Expert

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
Have a homework question? Get help from verified tutors now!

STAY HOME, SAVE LIVES Order your paper today and save 15% with the discount code MYHOMEWORKGEEKS30