The rising cost of fuel is currently having an impact on all areas of business, from small entrepreneurs to huge conglomerates.
Airlines have, of course, failed to escape the escalating price of fuel, and as such many are now starting to drop routes in a bid to recoup some of their losses.
Yesterday (May 28), American Airlines announced that it plans to scrap its Stansted to JFK route as part of its capacity reduction plans.
Operations of the route will cease on July 2 after just nine months.
According to the carrier: “This decision is among a number of first-round reductions to American’s flight schedule as part of the airline’s previously announced plans to reduce capacity in an effort to significantly reduce costs and create a more sustainable supply-and-demand balance in the marketplace.”
Speaking at AA’s annual meeting in Texas last week, chief executive Gerard Arpey signalled that the price of a barrel of oil has played a part in the airline’s current plans.
He said: “The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak US economy.”
Last week, Australian carrier Qantas also announced that it would be cancelling various domestic routes as a result of the soaring cost of fuel, including its Sydney to the Gold Coast route. It is also planning cuts to its international schedule.
Geoff Dixon, Qantas chief executive, said in a statement: “The fact is that fuel prices are something we have no control over, so we have to look harder at areas where we do have control.
“We must take these hard decisions now, however, if we are to ensure the ongoing strength of Qantas, preserve the jobs of the vast majority of our current workforce and position ourselves for growth when the trading environment improves.”
Air New Zealand has said that it will be using smaller aircraft for long-haul services in order to make up for losses made on expensive fuel. This includes its London to Auckland route.
Silverjet is another airline that is struggling in the current financial climate and while fuel prices are certainly taking their toll, it seems the carrier is hoping that an equity boost from investors, rather than reduced flights, will help it to become more secure.
