Airlines, tourism and globalization itself are threatened by the rise in oil prices.
By Mitchell Beer
Air travel emerged as the Achilles’ heel of the global meetings industry last week, when the Green Meeting Industry Council convened more than 300 live and virtual participants for the 2011 Sustainable Meetings Conference.
Ian Lee, an airline industry analyst at Carleton University’s Sprott School of Business in Ottawa, Canada, warned six out of 14 European airlines will go out of business by 2015 if oil prices remain at US$100 per barrel. If prices reach US$150 per barrel, nine out of 14 will disappear. Lee drew his data from a recent presentation by a senior executive with Irish air carrier Aer Lingus.
As this column went to (virtual) press, the benchmark Brent Crude oil price stood at US$112.43.
Lee commented “the cost of energy will radically impact the airline industry, the tourism industry, the hotel industry and the meeting industry. It will completely transform our economies, and it’s going to undermine globalization.”
Recent research shows airlines can’t sustain their current business model above an oil price of US$85.00. “Your industry won’t disappear,” Lee told participants. But “you’re going to be much more judicious” about using regional alternatives like rail, relying more heavily on combined live and virtual meeting formats and only sending people by air when there’s no alternative.
Long-haul air travel won’t disappear, either, because “you can’t take a train across an ocean.” But “this is going to drive policy changes. Maybe now we’ll see something we haven’t seen historically in Canada or the States, which is support for rail.” He said government support will be needed to expand rail capacity because of the high capital costs involved.
James Tansey, CEO of offsetters.ca, a carbon offset company in Vancouver, said demand reduction is the cheapest source of new energy. “It doesn’t mean no more travel. What it means is that we think a lot more carefully in 10 or 20 years’ time about how much we travel, how many miles we accumulate and the highest-value travel.”
Airlines have touted biofuels as the magic bullet to reduce their reliance on oil and lead them toward carbon neutral operations. Lee said biofuels carry 90% of the carbon footprint of oil, and corn-based biofuels would require an area twice the size of France to grow enough fuel to serve air travel.
The timing of Lee’s revelations could not have been scripted. Just four days before his appearance, the US industry released a groundbreaking study that credited face-to-face meetings with producing US$907 billion in annual economic activity, 1.7 million jobs and US$110 billion in tax revenue. Then, in the 24 hours after the panel, oil jumped above US$100 per barrel.
With the conference broadcasting its general sessions, the Twitter stream lit up when Lee released his data. “If airline travel reverts to the way it was in the 50s and 60s, what will that mean for all of us?” asked Judy Kucharuk of Footprint Management Systems Inc. “What about those whose livelihood depends on face-to-face meetings?”
About Mitchell Beer
Mitchell Beer, CMM, is president of The Conference Publishers Inc. in Ottawa, Canada, one of the world’s leading specialists in capturing and repackaging conference content. He tweets as @mitchellbeer. Beer is a member of the GMIC International Board, served on the program design team for the 2011 Sustainable Meetings Conference and was responsible for adding Ian Lee to the opening panel.
Talkback Readers: What will high oil prices mean for your air travel plans? And what does the threat to globalization mean for you? Share your thoughts on Talkback!