The price of crude oil reached $135 a barrel this week while jet fuel – invariably slightly more expensive – rose to $170 a barrel. This is a 430% rise on the $31 a barrel jet fuel cost in 2003.
This is alarming in itself but some analysts are predicting that crude will rise to $150 or even $200 a barrel.
Will airlines be able to operate under such prices? It seems unlikely as at current prices, profound changes are already being forced upon them. And if airlines do change fundamentally, what affect will this have on business travel?
Like many industries, aviation is cyclical. Demand rises and falls according to economic conditions.
Many analysts are comparing the current situation to that of 2001, post 9/11. But there is a very basic difference.
After September 11 and the horrors of that dreadful day, people were reluctant to fly. It took stringent improvements in security both at airports and aboard planes before people returned in numbers to the air. But even in the darkest moments as airlines furiously retrenched, they could see a way through. It was just a matter of giving passengers time for their confidence to fly to come back.
With the current crisis there is no obvious solution or way out. Because of the soaring price of oil, airlines' costs are rising inexorably. But it is a cost they are unable to control or influence.
William Ris, American Airlines' (AA) senior vp government affairs, described the price of oil as a "tidal wave coming from one direction" at the Association of Corporate Travel Executives' global education conference in Washington last week
He added: "The price of fuel which historically has been less than 10% of our costs is now approaching 40%. It has become in just a couple years our greatest expense - greater than labour or capital or taxation.
“And it is the only cost that we are virtually powerless to do anything about."
Mr Ris went on to quote an analysis written in March by Merrill Lynch: "Frankly, we do not believe that the US airline industry can withstand $100+ barrel oil prices without major structural change and as long as the industry remains highly fragmented, sustainable profitability will remain an elusive goal."
The truth of the Merrill Lynch analysis was brought home the day after Mr Ris' speech when his own airline announced swingeing cuts. At least 75 planes would be scrapped, capacity on domestic routes cut by 11-12% and there will be job losses among the 85,000 workforce.
BA which has just announced preliminary pre-tax profits of £883m is also looking at cuts in its winter schedule with loss making routes likely to be axed. The airline, despite its healthy profit, is also already studying the scenario where this surplus is reduced to zero by oil prices.
Willie Walsh, BA's ceo, said last week: "Consolidation has to happen in the US. You can't run an industry that is chronically unprofitable and expect it to last long-term."
"Were going to see casualties. We're going to see people fail. Prices are going to go up. The industry cannot survive unless it adjusts to these higher oil prices.”
Jean-Cyril spinetta, chairman and ceo of Air France KLM, joined the chorus of doom by acknowledging that if air fares wetnonrising, people would be put of flying, creating a new cocnenr for the industry.
It is almost certain that other airlines will be taking stock and thinking along the same lines. SAS has even asked its suppleirs otcut their prices f by 10% which a lot about blind optimism but not much aobut reality.
It is inkepeiogn with this mood of grim outlook that moves towards consolidation in the American industry are gathering pace with Continental Airlines, United Airlines and US Airways all in the ring. In Europe there is growing speculation as to how long some of the small loss making national carriers can last. These are the structural changes that Merrill Lynch talked about.
So far airlines have dealt with the rising oil price partly by absorbing it and partly by passing it onto customers via a fuel surcharge. But this can not go on forever. But what will be the tipping point? If oil prices continue to rise, the stage will be reached when flying is a major expense, and it once again becomes the preserve of the rich individual and wealthy corporate.
Mr Walsh has already been quoted this week as saying that the era of cheap flights was over and that airlines would have to raise prices or go bust.
If this is the case and air fares go on increasing, there will come a point when the corporate will say the cost of flying is too much. It will then be forced to curtail flights for its travellers and seek alternatives, like rail (where possible but this would be strictly limited) or rapidly increase its use of web and video conferencing. With the second there is the danger of reducing the essential face to face meetings which oil the wheels of business.
A third solution would be to allot more of its revenue to travel. If, as at the moment, the crisis in aviation is compounded, at least in the States, with a downturn of the economy, this might not be an option.
Despite the optimism of some recent survey, the soaring price of oil presents a dark picture for both aviation and business travel. The solution is not in the airlines' hands but the hard chaoices that willhave otbe made are. This is not a good time to own a airline.