A story in today’s news drives home the large forces at play when Southwest decides — as it recently did — to stop making flights from Boise to Seattle, Salt Lake and Reno. The International Air Transport Association, a trade group representing major passenger and cargo lines, says industry earnings will probably drop to $3 billion this year. That’s a more than 60 percent decline from last year’s net income of $7.9 billion.
The price of oil is the key factor in that projection of lost profits. Oil is now trading at about $107 a barrel. If the price were to spike to $150 a barrel, the AP writes, “the industry’s diminished profit forecast for 2012 could turn to losses of more than $5 billion.”
This morning, we reported on the local effects of airlines’ cost-cutting.
The story points out that a reduced number of flights in and out of Boise could affect state commerce and business recruitment efforts. Local business leaders and airport officials are on-guard against that possibility.
Airlines have little choice but to fly fewer and fuller flights, in light of high fuel prices. Midsize airports — like Boise’s — have been disproportionally affected by the resulting flight suspensions. Aviation analyst Michael Boyd points out that in some places cuts have been devastating. “Newport News, Virginia lost almost half of their service when Southwest Airlines decided to pull one of their subsidiaries out,” he says. “Kaboom, half.”
By comparison, Boyd says, Boise is faring well. Nevertheless, there will be 20 percent fewer seats leaving Boise this summer than last.