Times Of London Reports US Fuel Suppliers Demanding Cash In Advance From Airlines

[hatrack]

Airlines are being forced to pay cash in advance for jet fuel as the major oil companies tighten the screws on an industry that is being crushed by an extraordinary surge in the price of crude oil. Sources within the airline industry indicate that credit is being denied to most of the leading American carriers and the practice is moving to Europe and Asia. So uncertain is the cash solvency of the industry that jet fuel suppliers insist on prepayments into special bank accounts.

A credit controller at a leading European multinational oil company told The Times that the oil industry was moving to jet fuel prepayment. “It’s common in the US and it is moving to Europe. We have been moving to prepayment since Swissair went bust.”

The need to put up money before delivery of fuel is a huge financial burden that has been shifted from the oil companies to the airlines. According to John Armbrust, a US jet fuel consultant, the oil industry had $5 billion (£2.5 billion) of jet fuel credit outstanding to airlines before the 9/11 terrorist attacks. Now they are demanding that airlines leave cash on deposit.

“The airlines can’t afford it. Traditionally, oil companies extended credit for 14 or 21 days and some as long as 30 days. Now, most American airlines are on prepay. South West is one of a few likely to still get credit.”

EDIT

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article4004371.ece

[lurky]

1. I'd be scared too.

If they declare bankruptcy, it could be years before their suppliers see a dime.

[Possumpoint]

2. I Pay

for every tankful with cash or by credit at time of purchase. Why shouldn't the airlines? They want an exception so they can take advantage of the float? Every facet of our lifestyles will and has been affected by the increasing fuel costs. The Airline industry as we know it will change. It may end up that only the rich and businesses can afford to fly.

Every major industry feels and is passing on the high price of fuel to the ultimate customer. Our lifestyles have and will continue to change. The day of large, heavy cars and cross country tractor trailers may be over. Trains will reemerge. Mass transit will grow. More people will ride cross country buses.

The "R" word is hanging over our heads. Not Republican, recession. Most everyone is facing decisions on a daily basis as to gas vs. food or medicine, etc. Restaurants and entertainment are starting to feel the pinch. More vacations will be taken at home so the tourist industry will take a hit.

Are you ready?

[neverforget]

3. This will certainly thin the herd that is the airlines......

[phantom power]

4. Heh. "No personal checks!"