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’.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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