Airlines and the chemical industry

There are some close parallels between the airline and chemical industries. Both are very capital intensive, use oil as a key raw material, and are heavily dependent on operating rates as a driver of profitability. Therefore one probably needs to pay close attention to news that American, historically the strongest US airline, has announced it is ‘retiring’ jets in response to rising fuel prices. Whilst British Airways has warned that its entire operating profit for this year might be wiped out.
Recent statements from senior airline executives also have an ominous tone to them for chemical industry managers. Jean-Cyril Spinetta, CEO of Air France-KLM has said ‘air fares would have to rise’ and ‘admitted the increases could hit demand for air travel’. Willie Walsh of BA had an even bleaker outlook, commenting that ‘we’re going to see people fail’.

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