Hard Times Hit Low-Cost Carriers

Posted September 23, 2008 by Carl Unger

Airsouthwestwinglets3Sky-high jet fuel prices have taken a toll on airlines of all shape and size, but perhaps none have borne the brunt of astronomical fuel costs as much as the low-cost carriers. That's right, those darlings of the aviation world—JetBlue and Southwest among them—could be in serious trouble if the situation doesn't improve.

As Aviation Week points out, exorbitant fuel prices are a big problem when your entire business model is built around low fares. Throw in a need for low-cost carriers to expand quickly and capture new markets, and you have a recipe for an overextended, underfunded mess.

Which is not to say all low-cost carriers are in dire straits. Southwest, as everyone knows, was either brilliant or lucky when it hedged its fuel well below what most airlines are paying now. JetBlue, for its part, decided to delay delivery of new jets that would have drastically increased its fuel needs. And across the globe, low-cost carriers like Ryanair have cut back on capacity and grounded less-efficient planes.

So will low-cost carriers survive the fuel-price fiasco? Probably not all of them. We've already lost Skybus this year, and honestly, in this financial climate, no airline can consider itself safe from potential ruin. But before panic sets in, remember that most of the airlines we rely on to fly us cheaply from point A to point B have their best minds on the problem.

(Photo: Southwest Airlines)

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