Airlines Cope With Oil-Enforced Austerity

The rising price of oil has been devastating for the airline industry, causing costs to soar and fueling industry losses at a time when results should be stronger. But $40-plus oil may also be the best thing that could happen to the industry, forcing carriers to slim down or go belly up.

Every time the price of a barrel of crude oil increases by $1, the industry's costs increase $425 million, according to research from Bear Stearns. And with at least three carriers -- Delta Air Lines (DAL Quote), Northwest Airlines (NWAC Quote) and US Airways (UAIR Quote) -- actively pushing for employees to cut their own pay, chronically high fuel costs have shortened the amount of time they have to seek concessions, while deepening the amount they're asking for.

"Unsustainably high jet fuel prices could, in fact, be good for the industry," said Susan Donofrio, analyst at Fulcrum Global Partners, in a research report. "While we concur with labor that the current bloated cost structures at many of the airlines [is not labor's] fault, we still think that the numbers show there is the need to become more competitive."

The Second Quarter and $40 Oil

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