Fri, Dec 07, 2007
LCC Will Likely Follow Just One Of Those Routes
Saying the domestic airline industry hasn't yet realized the
surge in fuel prices isn't just a short-term spike, Southwest
Airlines CEO Gary Kelly forecasts higher fares ahead... and mergers
among the airline's legacy rivals.
"It feels like fares will need to continue to rise on an annual
basis because costs are escalating rapidly," Kelly (above) said at
the Reuters Aerospace and Defense Summit in Washington.
Kelly added those higher fuel prices, combined with signs of a
downturn in the US economy, may very well lead to the kind of
strife many airlines experienced in the years before 2006, when air
travel began to rebound.
"There is a lot of peril that remains," Kelly said, adding the
sharp increase in the cost of oil "isn't a spike. We're at a new
level. The industry hasn't adjusted to it yet. We haven't adjusted
to it yet."
When that time comes, Kelly adds, carriers will have to look to
each other to survive... making mergers inevitable, in his
"You will have a recession some time, and the impact on the
airline industry will be dramatic," said Kelly. "All of that leads
to consolidation, I think."
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