Airline crisis spills over to entire travel US travel industry

The current airline crisis is only the tip of the iceberg for looming travel troubles throughout the industry, according to travel observers.

“As the airline fuel crisis intensifies, the risk of major job losses in all travel and tourism sectors and in other airline-dependent industries increase as well,” said Jean McDonnell Covelli, president of The Travel Team Inc.

The Business Travel Coalition (BTC) recently put out a lengthy report on the seriousness of the situation:

“With airlines gravely threatened, so is our economic well-being in the United States.”

The group makes the point that airlines are the primary source for inter-city transportation and are critical to national and local economic development, the flow of human capital, the movement of just-in-time parts for manufacturing and the transport of perishable food and other items the economy depends on.

The failure of just one airline would lead to 30,000 to 75,000 unemployed people with payroll loses of $2.3 billion to $6.7 billion.

But the travel economy is like a deck of dominoes. With the fall of one domino, others would also face problems. Here are some other impacts of airline failures:

Ø       The US$165 billion meeting market could seriously shrink if larger numbers of meeting-goers could not fly to their destination.

Ø       Hotels could lose millions of dollars in cancelled bookings.

Ø       Business travel could be severely disrupted with slowdowns particularly in airline hubs and major cites.

Ø       The loss of income taxes paid by employees coupled with the loss of airline taxes would further complicate governments already struggling with declining revenues, the study points out.

Ø       The federal government would be facing more monetary demands from unemployment compensation funds.

Ø       Domestic tour operators would be hurt by declining volumes of group trips.

Ø       The US competes with other countries for tourists and with drastically reduced traffic, foreign tourists would be further discouraged to visit this country.

 “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,” said the BTC study. “US commercial aviation is in full blown crisis and heading toward a catastrophe.”

The BTC looks to government to find ways of stabilizing the shaky airline industry to prevent fallout from the rest of the travel industry. They urge government to make it a national priority.

Report by David Wilkening