High fuel prices threatening US and global prosperity?

Special From Pacific Asia Travel Association (PATA).
Report by David Wilkening

June 10, 2008; US and global economies could be hurt if airlines are forced to dramatically reduce their operations and close important routes due to record high fuel costs, warned the Pacific Asia Travel Association (PATA).

The warning came as major carriers -- including PATA members United Airlines and Qantas Airways -- announced plans to cut back on routes, ground aircraft and reduce jobs.

Hotels are particularly vulnerable to airline cutbacks, say tourism experts.

But destinations such as Hawaii could face a 25% drop in scheduled air capacity due to a combination of higher fuel prices and airline closures, according to the Hawaii Visitors and Convention Bureau.

“Airlines are not only the lifeblood of global commerce and industry, but an essential part of our society. We only need to look back five years to recall the catastrophic effects when people stopped flying due to concerns over SARS," said PATA President and CEO Peter de Jong.

PATA is discussing with airlines and other members how to identify practical measures that can be taken to help the industry survive this latest threat.

"One immediate option would be for national governments to review, reduce or defer taxes and levies on the aviation sector," said Mr de Jong. "We also need to pursue more vigorously alternative fuel options."

At a transport summit in Istanbul, the leaders of world airlines unanimously agreed to a resolution calling for governments, airports and labor unions to take immediate action to help the industry survive.

"Extraordinary times call for extraordinary measures," said International Air Transport Association (IATA) Chairman Fernando Pinto. "Airlines are an engine for global prosperity and failure amongst them would send shockwaves throughout the world economy."

Airline leaders called on governments to eliminate "archaic rules" governing airline ownership and air service agreements, to urgently modernize air transport infrastructure, such as air traffic control, and to refrain from imposing new punitive taxes.

Many PATA industry members are reviewing their business strategies in light of the fuel crisis.