Virgin Feeling The Pinch Of High Prices  

Like most airlines, local air carrier Virgin Blue is feeling the pinch from high oil prices. Cameron Leckie will also have a look at some aspects of Qantas and Virgin's exposure to fuel prices at TOD ANZ next week (the link will work then)

Budget carrier Virgin Blue will cut some domestic routes and raise fares by an average $5 across more than half its routes, in the face of a 21% rise in its fuel costs this year. It will freeze pay of all management positions in the coming fiscal year, but will not cut staff, the airline said today.

The measures are part of a $50 million package of cost savings and follow similar steps by other major airlines such as Qantas and Air New Zealand, which have raised fares and slashed routes as they grapple with soaring fuel costs.

Virgin also said it would take four jets from the domestic market, cutting planned capacity growth for the next fiscal year by 6%, and would redeploy some planes out of loss-making services into new or more attractive markets. "It's not a case of planning interim measures to offset a spike in the cost of fuel, all airlines must come to terms with a new reality in our industry,'' said chief executive Brett Godfrey.

Since shortly after I wrote about the looming disaster in the airline industry (see Airline Armageddon), I’ve been engaged in an interesting discussion via e-mail with a reader that I thought worth writing about publicly.

In essence, the questions raised by Airline Armageddon were: Have I joined the Apocalypticons? If so, why? If not, how can I write about the airline business in such stark terms and not be in that camp?

The first question is the easiest to answer: No, I haven’t joined the Apocalypticons. I still believe, right down to my DNA, that for all the challenges humanity faces–peak oil and global warming being right at the top of the list–we will rise to the occasion. It won’t be fun, it won’t be cheap, and it will entail significant human pain. But it won’t trigger the end of modern industrialized civilization or any other Apocalypticon fantasy.

The second question is now moot, which brings us to question number three and the heart of the matter, not to mention my motivation for writing this blog entry.

Boiled down to its essence, the answer is that the unique circumstances of the airline industry make it a very special case that’s not representative of our overall peak oil dilemma; in other word, their goose is highly likely cooked, while that of humanity or modern industrialized civilization isn’t.