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2004: Soaring Oil Prices Batter Airlines

Jan 2, 2015by Joe Anselmo in From The Archives

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What a difference a decade makes.

In 2004, oil prices surged about 50%, topping a then unheard of $50 a barrel. In this December 6, 2004 cover story, we wrote about how airlines were resorting to drastic measures to reduce expenses. And U.S. carriers, plagued by overcapacity, were unable to pass the higher fuel costs on to their passengers. It was a bloodbath.

As we enter 2015, the picture could not be more different. Oil prices have fallen about 50% since July, to less than $57 a barrel, about pumping up airline profits. And thanks to strict capacity discipline and full airplanes, U.S. carriers so far have not had to pass the benefits on to passengers in the form of lower prices.

So what will 2015 bring? The laws of supply and demand dictate that oil prices will eventually bottom out and rise again. But the recent relief is enabling the industry to start 2015 on a strong footing. 

American Airlines, Pilots Union Reach Labor Deal

The pilots union at American Airlines has agreed to put up for a vote a five-year contract proposal that would boost pay by more than 26 percent and offer smaller raises in later years. 

 The board of the Allied Pilots Association agreed late Saturday, just before a midnight deadline set by the company, to accept the basic terms of the deal before the offer was pulled and negotiations moved to arbitration. 

 The proposal's language must be completed and voted on by pilots, according to a statement on the union's website. 

 "Our goal was to conclude negotiations promptly and deliver the best possible result for our pilots," the statement said.