The airline industry has predictably been hit hard by recently elevated oil prices. AMR and Delta Air, along with jet leasing company Air Lease all hit 52 week lows last week. Jet fuel alone could represent 40% of airlines’ operating costs when oil prices are above $100/barrel. Jet fuel kerosene closed at a price of $3.3067/gallon last Thursday. According to airline industry group, IATA, sustained high fuel prices will drive a decline in airline industry profits of nearly 46% in 2011. IATA reports that “In this economic environment business travel and air freight demand will be more robust than price-sensitive leisure travel.”
The predicted hard hit to leisure travel has spread the pain to online ticket discounters like Orbitz Worldwide, whose price also hit a 52 week (and all-time) low last week. Of course it doesn’t help that the industry is fighting for whatever scraps of profit may be left to earn. American Airlines has sued Orbitz and other reservation system operators for allegedly anticompetitive behavior in an attempt to reduce the commissions it pays the booking companies.
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