Rising Oil Prices and the Threat to the Aviation Industry

We've all known about "Peak Oil" for some time and been warning that this will impact on unsustainable fossil-fuel dependent industries. This is starting to hit home already, yet state aid continues to be pumped in to prop them up.

It has been reported, the aviation industry faces danger from fragile consumer confidence and rising oil prices as passenger numbers fall at Stansted and Heathrow Airports. The leisure market, dominated by Ryanair and easyJet and charter operators, remains weak. Stansted and Southampton were BAA's worst performers last month, posting year-on-year falls of 7.4% and 8.7% respectively. Colin Matthews, BAA chief executive, said: "Continued rises in the price of oil are a concern for airlines and passengers in all our markets." John Strickland, an industry consultant, agreed saying: "The big concern in the industry is still the oil price. It is rising rapidly." Rising oil prices means the cost of fares are increasing, thus further reducing passenger numbers. Last week BA increased its fuel surcharges for the third time in less than four months as the price of jet fuel rose to $134 (£82) a barrel – three times its low point in early 2009, in a attempt to survive. Fuel accounts for nearly a quarter of airline operating costs and is largely out of carriers' control.

The spiraling costs of fuel has greatly impacted budget airlines, such as Ryanair. Ryanair said its fuel bill soared by 93% in 2008 and represented almost half of its operating costs, up from 36% 2007. Budget airlines are mitigating the increases by charging higher fees for checking in bags and priority boarding passes. Budget airlines will try to leave the prices of fares untouched, as cheap tickets are key to their business model which use bargain fares to pack passengers on to airplanes. "They cannot afford to raise fares. It would break their model," said Strickland. "Occupancy would fall and they will not make enough money to cover increased fuel costs." Furthermore, the cost of fuelling a transatlantic flight, the most profitable part of BA's business, has quadrupled since 2000 to $44,000 (£22,200). It is estimated many airlines will not survive a combination of expensive fuel and a drop-off in demand as passenger numbers decline due to expensive fares and dwindling consumer confidence.

This ties in with the work Birmingham Friends of the Earth has been doing. We oppose the growth in aviation as it is one of the fastest growing sources of greenhouse gas emissions, plus airports create noise, air pollution and congestion. Rising costs of fuel and increased usage of the aviation industry are highly unsustainable for passengers and the environment. We are against the growth of this industry and would like to see it pay its full environmental costs, not shift them onto the tax-payer. Joe Peacock reacted to the news this week of state aid being provided to subsidise the building of the runway extension at Birmingham Airport through the Regional Growth Fund. "The aviation sector pays no tax on its fuel and no VAT on the sales of tickets and planes but that is not enough it needs our help to build the infrastructure from which it plies its trade.” “These decisions show the hand of the Government and with its financial support of the aviation sector how it can claim to be the Greenest Government ever is beyond us.” It is hoped a process of due diligence on the bids will be open to full public scrutiny.

Gridlock City

Yesterday a problem with a crane caused chaos. One incident in town and all the streets are gridlocked. Buses are nose to tail and can't move the queues of people who are waiting.

Birmingham is in transport crisis because it is the largest city in Europe without a mass transit system. It has failed to create this over the last 30 years and is dying as a result. People can't get around reliably and its fatal for any city. Our transport system is worse than 60 years ago. We should be bloody furious.

I don't want to go to Leeds or Manchester, particularly. I don't want 30 minutes trimmed off the journey to places that I don't go anyway.

Birmingham people deserve an effective convenient public transport system in this city. London has underground and suburban rail stations within walking distance of most streets. That's why it gets the investment and jobs, not Birmingham. We don't need a faster link to London. We need faster links to other parts of Birmingham. Let's forget HS2 and get onto the real business, before the price of oil goes through the roof and people can't get to work. It's urgent.

John Newson

True Costs

Public transport is always being hit by the government when they need to save money and now is no exception, but if we think of the true costs of this over the past century, all those alleged savings from not keeping railways or bus services going would surely be cancelled out if we calculated the what the alternatives have cost the country.

Let's just think of a few things that are attributable to increased car use over walking, cycling or using public transport:

Congestion

It is hard to argue that our roads would be congested without lots of people each driving their own private vehicle. According to CBT, "the total cost of congestion is usually estimated at £20 billion a year".

Road accidents

Whilst some proportion of the accidents on our roads may involved buses, the vast majority are caused by cars. Again from CBT's 2008 report, "Last year there were 260,000 casualties on our roads, including 3,172 fatalities [1]. Using Government figures, the cost to the economy of these accidents was £12 billion."

Road-building

According to the Transport Select Committee, "Government spending on roads has almost doubled in real terms since 1999–2000." In 2005/6 it was £6.6 billion and we know that with all the damage caused by the freezing weather this winter many councils are struggling to keep roads repaired and in decent condition. With fewer cars, we could scrap all new road-building schemes and ensure that those we have suit the needs of buses, cyclists and pedestrians better.

Carbon Emissions

Passenger cars emitted 76.8 million tonnes of CO2 (or 20.9 million tonnes of carbon) in 2007, according to DEFRA. Using Stern’s figure of £190 per tonne of carbon, the carbon caused by these cars cost nearly £4 billion.

Obesity

The modern disease caused by sedentary lifestyles and over-eating costs the NHS £14 billion a year. It would be unfair to blame all of this on car use over more active forms of transport, but promoting walking and cycling could certainly help to fight it and reduce these costs.

In times when we are being told to look for ways of saving money, we should certainly not see spending money on public transport as anything other than a saving to the country as a whole when we see the costs of ever more cars on the road. It looks as if the distances that people are travelling have now peaked and are no longer going to keep on rising exponentially along with economic growth (although whether that will happen is also up for debate). To save money we need to invest in safer roads for cyclists and pedestrians and taking road space away from cars to make public transport work better. The benefits in savings and quality of life for all could be huge.

Let's start with showing how many cars we can take off the road for In Town Without My Car Day 2010.

Joe Peacock

[1] From Transport Statistics Great Britain 2007, published by the Department for Transport, November 2007

Section Eight, Transport Accidents and Casualties: Table 8.1

http://www.dft.gov.uk/pgr/statistics/datatablespublications/tsgb/2007edition/sectioneighttransportacciden.pdf

Extremist? Moi?

The Birmingham Post ran an editorial yesterday attacking our position on the runway extension at BIA and stating, amongst other things, "how out of touch they are with the real world" and asking us to come clean about our agenda.

Now when I was on the radio recently, airport chief Paul Kehoe uttered the legendary phrase "I don't know what planet Friends of the Earth are on" and this seems a remarkably similar line of attack.

The accepted "wisdom" around making economic policy in the West Midlands all seems to be based on there being limitless resources that we can carry on exploiting regardless. What kind of real world is that, exactly?

The real world is the one in which recently the High Court ruled that the Aviation White Paper of 2003, on which all current expansion is based, was obsolete because it does not comply with the Climate Change Act of 2008. It is also based on oil costing $10 a barrel, which is never going to be the case again and the Stern report 2006 also indicates that the economic case for dealing with climate change should be re-examined so as to mitigate now and not allow business as usual.

The concerted efforts by those driven by ideological opposition to government intervention in markets to tackle climate change or short-term business interests to find some real evidence of collusion or fiddling the figures in "climategate" have all failed, so we now have to get on with dealing with this problem. With consensus shown by the leaders of the three main parties on this (if not all the solutions), we are not saying it is time to ground all flights, but that expansion is not the answer when resources are limited and the business case does not stack up.

Localise West Midlands have also blogged on this in support today and their points about "a fuel-scarce future" are as key as any on the impacts of climate change. Prices will only go one way, whether through taxes or demand outstripping supply in the near future, so to rely on affordable oil for air travel is unwise to say the least, as is thinking that biofuels can replace oil without having a devastating effect on the world's eco-systems and capabilities to grow sufficient food.

Unless aviation plays its part in cutting CO2 emissions, other sectors will have to make much deeper cuts, so where would you choose to make those cuts? Also, aviation is currently massively subsidised and ticket prices have fallen compared to the cost of living over the past decade, whereas trains and bus ticket prices have gone up considerably and are among the highest in Europe.

The economic benefits of aviation are wildly exaggerated, as we have pointed out on many occasions. Even Heathrow's claims to make the economy money have been debunked and London is the one place that doesn't have a tourism deficit from aviation. To say only areas that have a large international airport from where people can fly non-stop to destinations all over the world can be successful econmically is also to ignore data from all over the country.

Therefore, our agenda is simple - don't subsidise high carbon polluting forms of transport, such as aviation and give local people a fair deal by spending money from the public purse on projects that have a real benefit.

This doesn't mean we are being extreme, but we want the real story behind the claims on economic benefits to be examined more carefully. If we are to build a long-term sustainable economy that is not dependent on a fast-disappearing resource, we should not be looking to increase airport capacities now, but be planning to use the skills of people in the region to build local markets that are not dependent on aviation.

Once new government guidance is drawn up that relies on the latest scientific and economic data around climate change, oil supplies and low-carbon alternatives we can decide how to best manage demand for aviation. Rushing into decisions to fund extra capacity now would be foolish and waste valuable financial resources at a time when the public purse is being squeezed hard.