While the state media and the State Senate stick their fingers in their ears, cover their eyes, and ignore the reality around them actual business observers are sounding the alarm about the growing crisis in the airline industry. Via the Dallas Morning News comes a Business Travel Coalition report examining the "catastrophe" that the airlines are headed for - and their belief that a "national energy policy" is needed to deal with the looming disaster:
As a consequence of the skyrocketing price of oil, the U.S. commercial aviation industry is in full-blown crisis and heading toward a catastrophe.
In the hopes of bringing attention to the magnitude of the oil crises, Business Travel Coalition (BTC) commissioned AirlineForecasts, LLC to provide an analysis of what oil at several different price points means in terms of lost airline jobs, reduced seat capacity and increased fare levels.
AirlineForecasts concludes that if oil prices stay anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009. The implication is that several large and small airlines will ultimately end up in bankruptcy, and of those, some will be forced to liquidate.
While economic theory suggests higher and unsustainable fuels costs will lead to a smaller industry, it does not necessarily follow that the industry will reach its smaller size before collapsing along the way under the weight of higher fuel prices.
In other words, high oil prices are going to cause higher fares on fewer flights on fewer airlines. Not exactly a ringing endorsement - and as we know that fuel costs are going to remain high for the foreseeable future, this problem is only going to get worse - as the report recognizes:
The U.S. airlines, and those who depend upon them, are watching with growing alarm as their cash reserves fall precipitously toward zero as the price of oil, already at unsustainable levels, continuously spikes into uncharted territory. These airlines and their stakeholders have never faced a darker future.
I don't see how the state media and the State Senate can continue to ignore this crisis. Neither group has paid any attention whatsoever to the issue. The media continues to prattle on about "financial risk" with the HSR bonds whereas the true risk lies with doing nothing as the airline industry collapses. And the State Senate, which could not be bothered to even mention the airline crisis or the oil price issue, is equally ostrich-like in its approach to HSR and the overall transportation environment in California. The BTC, which knows much more about that transportation environment, is not so sanguine:
The consequences of the hole this will leave in our nation's transportation grid will be extremely profound for our economy, society and culture.
A catastrophic result for U.S. airlines can be averted if policymakers, particularly in the White House and Congress, step up purposefully to address this monumental challenge. There is still time to make a difference. This is important not only for airlines and their passengers, but also for every business that uses oil products.
The BTC did not provide specific suggestions aside from calling for a "national energy policy" and Congressional action to stabilize the airlines. My guess is they'd like another bailout. Subsidies are OK for airlines even though their basic business model is collapsing but god forbid we spend some money on a proven travel system that takes the burden off of airlines and provides sustainable travel that is independent of oil prices - HSR.
But at least the BTC is sounding the alarm. It's an alarm that is growing louder. Who in California will hear it?