KEY POINTS:
Air New Zealand is counting the cost of soaring oil prices, with a round trip from Auckland to London amounting to almost $1 million.
Chief executive Rob Fyfe revealed the "sobering" bill for fuelling jumbo jet flights via Los Angeles in the latest edition of the company's Koru
News.
He said that more than 20 airlines had gone bankrupt this year in the wake of oil price hikes and slowing global economies.
Many surviving airlines have had to "lay off thousands of staff, cut salaries or remaining employees and park hundreds of aircraft".
He had no doubt "many more airlines would go bankrupt" as fuel prices continued to climb.
The International Air Transport Association (IATA) said 25 airlines folded in the first six months of this year and they included large and small operators around the world.
"Certainly the high price of fuel is having an enormous impact on the industry and we expect the list of 25 will grow," said an IATA spokesman.
Fuel accounts for nearly 35 per cent of airlines' operating costs.
The price almost doubled in a year before easing back to its current US$1.58 ($2.19) a barrel, 75 per cent higher than a year ago.
The association said every dollar increase in the price of crude oil added US$1.6 billion ($2.2b) in costs to the aviation industry.
Air New Zealand declined to expand on Fyfe's comments, saying the company's annual result was being released on August 26 and it would be difficult to discuss the impact of fuel price rises "particularly as it relates to profitability".
The airline has raised fares four times this year to offset the cost of fuel and more increases may be on the way. Its fuel costs doubled to about US$2b ($1.6b) in the year to June 30.
Leslie Brown, of Victoria University's school of accounting and commercial law, said fuel was "the most significant moving cost" for airlines.
Others costs included aircraft, staff, management and catering. Some bills could be reduced, others could not.
Brown said airlines were becoming "very pernickety" about cutting weight on aircraft to reduce fuel costs. This could include replacing paper products such as in-flight magazines and flight manuals with electronic versions, encouraging passengers to buy duty free on arrival rather than departure, discouraging passengers from carrying too much baggage and even looking at the body weight of flight attendants.
"They are trying, kilo by kilo, to reduce the weight," said Brown. He said raising fares to offset fuel costs was a "delicate" balance. A small airline such as Air New Zealand with mostly longer routes had less flexibility in tackling its overheads.
Airlines were increasingly experimenting with more efficient planes and bio-fuels to meet the challenges, said Brown.
"There are enormous economic consequences for everybody. It's become a reality as we shuffle huge numbers of people around the world. Technologically the race is on to produce sustainable ways of doing that."
PILOT TRAINING UNDER THREAT
The pilot training industry has been left "on a knife edge", according to the head of the Aviation Industry Association.
"It's impacting right throughout the industry," said Irene King.
"Some flying schools have indicated to me they might have to shut down. They can't bear the pain any more. A number of smaller ones have pulled out of training altogether."
King said operating costs had risen dramatically in the past five years, with fuel bills up 74 per cent.
"I spoke to one school last week, whose fuel bill has increased from $400,000 at the beginning of the year to a projected $700,000 at the end of the year."
King said some of this might have been represented by increased flying hours but the rise in fuel costs had been "massive".
Whangarei-based Quantum Aviation closed its Kerikeri operation last week, citing economic factors, primarily fuel costs.
Operations manager Jennifer Wooldridge said its fuel costs had gone up at least 45 per cent this year. "The school up there had been unprofitable for a while but that was the straw that broke the camel's back. It's affecting everyone. It's a real issue for a lot of schools around the country."
Wooldridge said the company had tried to absorb the cost but it had increased too much.
King said aviation operators were already turning to biofuels and more fuel-efficient aircraft to reduce costs.
"If we can weather this storm we will see a different industry in five years' time."
