Implosion of the Airline Industry

I have heard a lot of people over the years predict that one of the first casualties of Peak Oil would be the airline industry. When fuel prices rise, airlines have to raise prices. When they do that, people don’t fly as much.

Whether peak is upon us or not, sustained high oil prices are providing a preview of a post-peak airline industry. Most airlines are losing money like mad. Northwest and Delta are merging. Aloha Airlines went bankrupt. Frontier has declared bankruptcy. Beyond the bankruptcies of some smaller carriers, Richard Branson is predicting that one of the majors will go bankrupt within 18 months.

It’s an ugly situation, and I don’t see it getting better any time soon.

21 thoughts on “Implosion of the Airline Industry”

  1. Let’s hope their buddies in government leave them to their own devices. No more Bear Stearns with OUR money, Mr. Bernanke! Some of these guys have been struggling to make a profit for years, a good cleanout is overdue. The current capacity is probably based on oil @ no more than $50/bbl. This is pretty much inevitable.

    Tough on the little guys, as always.

  2. Seems like the perfect time to start investing in high speed rail.

    Rail of any sort, I think… as I read it once, “you’re making a long-term bet that (the friction of steel wheels on steel rails) will remain < (the friction of rubber pneumatic tires on asphalt)". I believe Warren Buffet has been bullish on rail (CSX etc) for some years now.

  3. I probably should have specified “rail for freight” in my previous comment, but rail passenger numbers in the US have been steadily increasing year-over-year for most of this decade, too.

  4. If airline bankruptcies are a sign of peak oil, then we’ve been experiencing peak oil almost continually since the 1930s.

  5. Fuel costs are certainly a primary issue, but airlines have many more problems than just fuel costs: 1) They have huge debt/funding needs at a time when the finance industry is imploding; 2) Security checks obviously hamper them to some extent, and this has escalated recently; 3) They have relatively low marginal cost, and thus with artificial competition buoyed by the government’s effort to support the airline industry, each has an incentive to offer low prices even when they have a dire need to raise prices.

  6. The faster the airlines disappear the better off we are. I estimate that not 1% of airline travel is in any sense “essential,” and jet engines are the fastest-growing source of greenhouse emissions, and jet emissions are even more damaging than ground-level emissions from cars and power plants. Since its birth the airline industry has never made a net profit and frequent bankruptcies and bailouts are the history of the trade. The sooner they disappear the better off normal people will be because we won’t be expected to hurtle cross-country thousands of miles to sit through a four hour meeting that could just as easily been conducted by teleconference, and we can stop supporting the welfare industry of airport construction and expansion. I look forward to the days when jet travel returns to being the province of the military and the very, very wealthy. — JMG

  7. Add to the discussion the topic of carbon credits and you’ll see how quickly the airline industry will go belly up. Al Gore’s most recent speech over at is all about the need for carbon credits.

    George Monbiot, another proponent of carbon credits, might be a tad extreme, but he estimates, in his book HEAT, that a yearly ration of carbon credits would barley get you from the US to Europe and back again. That’s one flight and ALL your entire carbon ration for a full year–never mind eating, housing, and all that. Should be noted that Monbiot advocates a 90% CO2 reduction by 2030.

    Check out Gore at
    Mobiot’s book is called Heat – How to Stop the Planet from Burning

  8. JMG and andreas: I couldn’t agree more.

    Now where’s that “clee” guy from last week who wasn’t going to give up his flying for anything, and was arguing that flying is the most economical and greenhouse friendly way to travel.

    Enjoy our discussion in the comments here:
    Truckers Back Speed Limit

    We are all in denial about flying. You, me, RR, everyone.

  9. Stop mis-quoting me, carbonsink. I never said flying was the most economical and greenhouse friendly way to travel. I just said for me to travel from San Francisco/Oakland to New York City on a Boeing 737, like I usually do, uses less fuel per passenger mile than if I took the Amtrak trains. So don’t use me as a crutch for your off-topic rants.

  10. am I the only one that fears the social implications of a loss of wide area mobility? It seems to me that as we lose the ability to move to different parts of the world, we will become more parochial, more narrow in our understanding of the world about us.

    when I was growing up in the late 50s and 60s, nobody went anywhere except to the same old summer camps or hunting sites. in this world of very little travel I was surrounded by people saying really nasty things about French-Canadians, Puerto Ricans, blacks, welfare recipients, Catholics, retarded, and probably others I can’t remember. this world didn’t change until cousins who traveled different parts of Central America and Europe came back for visits in the summer. My cousins challenged my parents and grandparents generation’s bigotry as result of their own travel experiences. this wide range of travel was made possible by affordable airline flights. it would not have been practical to travel any other way.

    I already see the green movement giving rise to a new bigotry. This bigotry arises because there is no empathy for what other people value as important.

    if we submit to the Green life and live in a very small geographic space eating fresh local food for six weeks out of the year and preserve for the rest, we will live a much narrowed life in contrast to the kind of life we can live today. I fear that this narrow a life will reinforce bigotry against others on a very wide scale and reintroduce social restrictions on how people can live and express themselves.

    country mouse (who really needs to get a collection of open IDs)

  11. Well, country mouse, you can have a chance (no more) for a stable climate or you can have jet travel for the masses. Which would you prefer?

    The loss of jet travel doesn’t mean the loss of travel — it means the loss of a very specific kind of cheap mass tourism, which has very little to do with fostering international understanding.

    But, either way, rich people who keep flying are going to find the natives in foreign destinations not so welcoming, since the poor countries will get the worst of climate chaos first; it’s not like these countries don’t understand how much our 150 year fossil-fuel party has cost them. I think that before too long tourist flying will be recognized as the selfish and destructive act that it is. — JMG

  12. I just said for me to travel from San Francisco/Oakland to New York City on a Boeing 737, like I usually do, uses less fuel per passenger mile than if I took the Amtrak trains.

    Ummm … but it doesn’t:

    The US Transportation Energy Data Book states the following figures for Passenger transportation in 2004: [34]

    Rail (Commuter) 5.3 L/100 km (45 MPGeUS)
    Rail (Intercity Amtrak) 5.6 L/100 km (42 MPGeUS)
    Rail (Transit Light & Heavy) 5.6 L/100 km (42 MPGeUS)
    Motorcycles 4.6 L/100 km (51 MPGeUS)
    Cars 7.2 L/100 km (33 MPGeUS)
    Air 8.1 L/100 km (29 MPGeUS)

    But you go ahead and believe the aircraft manufacturers propaganda. I’ll believe the US Transportation Energy Data Book.

  13. Looks like some international flights are gonna be forced to start traveling longer distances, to get to the same destinations.

    Every year, intercontinental flights carry thousands of passengers over Earth’s poles. It’s the shortest distance between, say, New York and Tokyo or Beijing and Chicago. In 1999, United Airlines made just twelve trips over the Arctic. By 2005, the number of flights had ballooned to 1,402. Other airlines report similar growth.

    “Solar storms have a big effect on polar regions of our planet,” says Steve Hill of the Space Weather Prediction Center. “When airplanes fly over the poles during solar storms, they can experience radio blackouts, navigation errors and computer reboots all caused by space radiation.” Avoiding the poles during solar storms solves the problem, but it costs extra time, money and fuel to “take the long way around.”

  14. Well,I think everything but planes will be electric in 20 years. Planes will use biofuels or synthetics. Jet fuel is only 6% of oil use. I was surprised to learn a lot of cruise ships and megayachts use electric propulsion already. The Navy is headed in that direction too. Going electric doesn’t automatically mean the end of CO2 emissions. It could make the air even dirtier. That’s why I favor government mandated solar on new construction.

    Put my wife and son on a flight to LA yesterday. She could’ve earned a free ticket by waiting for a later flight. There were 310 passengers,and only room for 300.

  15. Funny I thought passenger numbers were rising steadily.

    The bankruptcies and mergers are a re-organisation of the industry, whose existing companies seem to be smaller than optimal. And I think changing regulatory climate has a lot to do with it too.

    Sure it’ll get more expensive if the price of energy keeps rising, but people are getting richer too. And they value being able to see relatives far away (or take a job far away) pretty highly, it seems.

  16. The loss of jet travel doesn’t mean the loss of travel —

    the cost (monetary and non) of travel changes how people travel. when my paternal grandparents traveled back to Sweden by boat, they went once or twice a decade spending 4-5 days each way traveling and a month or more visiting. when they started going by air, they went every 2-3 years staying for 3 weeks. as the time cost of transit dropped, travel is easier especially if one is limited in the amount of time one can spend traveling.

    in the case of my cousins, without planes, they would not have traveled as far, maybe only a few states. hopping boat for another land costs much more than taking a plane (took the Canberra to Africa to see an eclipse in 73. my friends that flew saw much more of Africa than I did even though we were gone for about the same time).

    it means the loss of a very specific kind of cheap mass tourism, which has very little to do with fostering international understanding…I think that before too long tourist flying will be recognized as the selfish and destructive act that it is.

    in case you have any doubt of what I mean by green bigotry, this is unfortunately a good example of intolerance of what others value (time, freedom of movement, right to left alone, move fast alone).

    yes, we all have to change how we use energy but take care to not create a green fascism dictating how others must live. think about the social impact of green choices and not just the green fantasies. look to history for models of the future and look around for analogues to show the impact of “new ideas”.

  17. Well, thats the fun thing about value.

    Change the market, and people can determine how much they really value something.


    It’s like living off of subsidized sushi for decades. And then all the sudden the subsidies get taken away.

    Well I’m sure you really value that sushi, but frankly you’re going to have to buy what you’re willing to pay for.

    So you might get stuck with ordering Pizza instead. The horror!


    Arguing that you shouldn’t have to pay the full cost/damages of a product/service simply because you’ve grown accustomed to it, is a rather flimsy argument.

    You want it? You pay for it. Simple as that.

  18. Aircraft are capable of getting 40-50 mpg per passenger. Few vehicles in the US are getting 33mpg on the highway, though admittedly a family of 4 in a 20mpg SUV is getting 80mpg per passenger.

    I believe air travel worldwide accounts for less than 3% of our petroleum use – I could think of better places to start cutting back.

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