Will Airlines Shut Down This Summer?

All your bags are packed and you're ready to go. You're leaving on a jet plane. However, what happens if there are no jet planes to leave on? Speculation talks around wall street that due to high oil prices, one should not be surprised if any day now, you could wake up to hear that all the airlines have shut down.

Now, this is just speculation and it may not happen. Nevertheless, those that do fly frequently or those that might fly over the summer, need to take precaution perhaps by buying some traveler's insurance.

OnABC news, Southwest Airlines CEO Gary Kelly said that no airline can make money at $123 a barrel. And his airline is actually the only large airlines that actually made a profit in the first quarter of this year. Can you imagine if we do see $200 a barrel as Goldman Sachs predicts, where will the airlines be then? At the time of this article, oil has dropped from its high around $133 per barrel to $129. The question is, have we seen the top for now in oil or is this temporary?

Fuel does represent 40 per cent of the airline expenses according to the industry. When you have a rise in oil going $3 or $4 a day or more and these airlines have to buy fuel at these levels, how much longer can they survive?

In order to cut down on costs, airlines are reducing their capacity by eliminating some hubs across the nation. So now, instead of getting direct flights, you're seeing one or two stops to your destination or premium prices if you can get a direct flight. We are already seeing this in cities like Pittsburg that have reduced significant services and many other cities changing their fall air service.

We are also seeing a lot of surcharges added with the airlines. It was just a couple of months ago when United started the ball rolling with charging $25 for the second bag to be checked. Just last week American Airlines announced they would charge $15 for the first bag. Prior to that, I heard small charges will be added for a window seat or an aisle seat. What's next- a charge to go to the bathroom? Boy, would they make a lot of money from me.

So what can be next? There can be a case made that perhaps they are nationalized here in North America. Yet, at the same time, the risk can be great in owning them if oil does hit $200 a barrel.

So, if you are flying this summer and if you'd like to learn about buying Traveler's Insurance, please read "Do You Need Traveler's Insurance?" It could be your saving grace, providing the insurance companies aren't next.