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Fly the Costly Skies

<p>With fill-ups costing close to $70,000 for a transatlantic flight, airlines are facing a grim future.</p>
June 6, 2008, 10am PDT | Michael Dudley
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"When Air Canada [AC.A-T] fills up a new Boeing 777 in Toronto with jet fuel for a one-way flight to London's Heathrow Airport, it now costs $68,948.

While the airline is stronger than many rivals, that kind of sticker shock underscores why global carriers are finding it hard to avoid red ink, even with the introduction of hefty fuel surcharges. Monday, the industry itself forecast at least $2.3-billion (U.S.) in combined losses this year.

The International Air Transport Association's (IATA) dim projection is based on a conservative average oil price this year of $106.50 a barrel. The airline sector's 2008 losses would surge to $6.1-billion if oil prices average $122 a barrel – still lower than Monday's $128 but higher than the $105 average so far this year.

Even with new fuel-efficient Boeing 777s, Air Canada's fuel surcharge on the Toronto-London route doesn't cover the one-way fuelling costs of $197.56 for each of the plane's 349 seats.

Air Canada also uses smaller Boeing 767s on the transatlantic service, with the fill-up costing $47,658, or $225.87 for each of the aircraft's 211 seats. The Montreal-based airline's current fuel expenses are based on oil prices of about $130 (U.S.) a barrel.

Analysts estimate that every annual increase of $1 a barrel chops $25-million (Canadian) from the carrier's operating profit. While it's too early to determine whether Air Canada will have a money-losing performance in 2008, the airline posted an operating loss of $137-million in its first quarter.

'The situation is grim,' said IATA director-general Giovanni Bisignani, who compared the plight of airlines with 'Sisyphus – a mythical character whose fate was to constantly carry heavy loads uphill.'"

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Published on Tuesday, June 3, 2008 in The Globe & Mail
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