free html hit counter Peak Oil Debunked: 194. AIRLINES: CANARY IN THE COAL MINE

Friday, December 23, 2005


A common peak oiler argument is that airlines are the "canary in the coal mine":
In mining lore there is a story about miners placing a canary in the mineshaft to test the safety of its atmosphere. If the bird lives, the air's breathable and you're probably going to be ok. If the bird dies, get out quick. In today's world, the airline industry is that figurative canary in the mineshaft. For those wishing to know where the peak-oil crisis--as it pertains to the economy--will start, I think it is here.Source
The theory is that airlines are more susceptible than other industries to high fuel prices, and we'll know we're in big trouble when the airlines begin to collapse.
Assuming that this is true, it's reassuring to see how healthy this "canary" is. This year has been a record-setting boom year for Boeing and Airbus:
Boeing may be on track to beat 1988 record for jet orders

SEATTLE (AP) — Boeing (BA) has booked 870 net jetliner orders so far this year, which the company says may put it on track to beat a record set in 1988.

Boeing and McDonnell Douglas, who have since merged, booked 877 net orders that year.

The aerospace company, which produces commercial airplanes in Seattle, said Thursday that it may win more orders before the end of the year. That could push its total over the 1988 figure.Source
If the airlines are on their death bed, why are they buying so many new planes?
Check out the chart for Boeing stock:
As you can see, that's hardly the chart of a dying industry. Higher oil prices have led to booming business for Boeing, not collapse. Part of the reason is the increased drive for fuel efficiency:
Overall, Boeing is on track to sell more airplanes than Airbus for the first time in five years, amid strong demand for both companies' offerings. Airlines have been especially keen on the 787 because it promises up to 20% more fuel efficiency than any model on the market today — a key selling point as many airlines struggle to make money amid high fuel prices.Source
This is interesting because it runs counter to the doomer theory that higher fuel prices lead to economic ills and decline. In the case of the aircraft industry, higher fuel prices are stimulating business, and driving new growth.
-- by JD


At Friday, December 23, 2005 at 6:53:00 PM PST, Anonymous popmonkey said...

i have a friend who works for boeing and he responded basically the same way when i asked him about this a few months ago.

however, he also told me that airplane orders are usually made long in advance (many year) and that there's a run on new planes right now exactly because of fuel cost concerns. it's very expensive, but logistically a lot easier for airlines to replace fuel hog aircraft than it is to replace the civilian vehicle fleet.

At Friday, December 23, 2005 at 9:59:00 PM PST, Anonymous Anonymous said...

popmonkey has a good point. Besides the US airliner inventory is getting long in the tooth, and due replacement anyway.

A second point is that the buying decision is made by the same people who have run the airlines into the ground in first place, need I say more?

A related point to ponder is, why are we still wasting billions to extend hyghways, rather than using the funds and right-of-ways for mass transit?

At Saturday, December 24, 2005 at 3:03:00 AM PST, Blogger Omnitir said...

Just like virtually every aspect of the modern world, the airlines have a lot of areas in which to improve efficiency, resulting in many peak oil solutions on the demand side. Because of this the airlines, along with the rest of the developed world, will be around for a long time to come.

Reading about robotics and AI thanks to the link to Jan-Willem Bats blog in post #192, it seems that a likely trend will be automation, considerably cutting costs. Consider the possibilities when the first major airline begins operating crewless flights. By not needing to pay the substantial salaries of any flight crews, an airline could conceivably offset rising fuel prices for a very long time. This is of course only one example of where airlines could cut costs to meet rising fuel prices, and also only one example of the potential of automation.

At Saturday, December 24, 2005 at 4:02:00 AM PST, Anonymous WW said...

Modern airliners are virtually automatic in a case; the flight crews do very little actual flying. The crew are there for 'emergencies' and things the AP cannot cope with. The same is true is other highly automatic areas: Power stations, industry, rail transport etc Although there will be an attempt to reduce staff further for practical reasons we won't see crewless flights anytime soon. Nevertheless, the recent orders of aircraft are a reflection of aircraft coming to the end of their lifespan. In fact in the industry has made no money for several years (overall) and there is considerable subsidy keeping flights going and aircraft built.

The US problem is however one of over capacity and financial liabilities.

At Saturday, December 24, 2005 at 6:20:00 AM PST, Anonymous Chris Vernon said...

I don't think the order books of Airbus and Boeing are a fair indication of the health of the airline industry.

I recently wrote about the dodgy forecasts UK airport expansion is based on:
Aviation White Paper Disaster

It should be pointed out that four of the top six US airlines are operating under bankruptcy protection which does not seem the behaviour of a healthy industry:

Two of the largest US airlines have filed for bankruptcy protection within minutes of each other. Delta and Northwest now aim to join United and US Airways, which are already operating under Chapter 11. Link

At Saturday, December 24, 2005 at 8:48:00 AM PST, Anonymous Concerned Optimist said...


Boeing is not the entire airline industry as you impy it is here. Most of the majors are in or teetering upon bankruptcy.

If the industry was doing anywhere near as well as you imply it is doing, the majority of the majors would be doing as Boeing is doing. But they aren't. They're bking instead.

You really need to learn the limits of your intellecutal ability. You are great at providing your readers with interesting but essentially irrelevant information such as the post about sea-coal.

That's mostly why I come here. To see if you've uncovered any interesting little tidbits.

But whenever you venture off and attempt your own analysis, as you did here, you make yourself out to be a fool.

This post wasn't as hall of shame worthy as you're one about the banking system, about vertical farming, or the one you let somebody post about transporting our consciouness into computers as a mitigation strategy, but it's pretty darn piss poor.

Try again next ime or, better yet, learn your limits and stick to what you're good at.


At Saturday, December 24, 2005 at 8:52:00 AM PST, Anonymous CEO said...


You wrote:

"By not needing to pay the substantial salaries of any flight crews, an airline could conceivably offset rising fuel prices for a very long time."

This is true for many industries: manufacturing, order taking, IT, etc. . .

What are you and all your debt ridden classmates going to do when all the high paying jobs are automated?

I'll tell you what you're going to do: you're going to be out in the tomato fields performing slave labor for me and my rich friends who are busy automating and outsourcing everything!

Hope you have a strong back and are good at doing stoop labor.



At Saturday, December 24, 2005 at 6:07:00 PM PST, Blogger James said...

This is not related to the topic at hand, but Merry Christmas and Happy Holidays to all who read POD.

On-topic: Agent Smith from the Matrix said it best: "It's Evolution, Neo. Evolution. Just like the dinosaur. You had your time. Now this is our world, this is our time." It applies to airlines, as sucessful business models pick off defunct business models in the airline industry.

It also applies to human labor vs. AI, somewhat scary. But the politics of it all will prevent it from being a sudden shift into an AI workforce...

At Sunday, December 25, 2005 at 3:37:00 AM PST, Anonymous Anonymous said...

I feel the need to point out that
air travel really is a luxury afforded to only a small minority of our population, not really neccessary, and
in a world that is exponentially more networked with every passing moment, the airline industry is becoming obsolete. Look for Mega-Suv's to follow a similar trend in the next few years regardless of fuel prices.

At Sunday, December 25, 2005 at 1:56:00 PM PST, Blogger Omnitir said...

Still off-topic about the airlines sorry, but there’s another thing that “ceo” said about automation that I’d like to comment on:
I'll tell you what you're going to do: you're going to be out in the tomato fields performing slave labor for me and my rich friends who are busy automating and outsourcing everything!
If this is what you think automation will result in then you better do some more reading and more thinking. The point with advancing robotics, is that a humanoid robot will soon be able to do the simple laborious jobs that most of the current human workforce does <>better and cheaper<> then a human ever could. Human slave labour? Why bother when it’s cheaper to buy and fuel a robot that outperforms humans by a long shot? A robot would pay for itself in a short time, while a human, even one that’s a slave, would constantly cost money and comparatively be a poor performer.

No, there won’t be a return to slavery. Instead there could be mass unemployment. How will governments handle this? Perhaps we will need to rethink modern economics?

At Monday, December 26, 2005 at 3:15:00 AM PST, Anonymous Chris Vernon said...

The point with advancing robotics, is that a humanoid robot will soon be able to do the simple laborious jobs that most of the current human workforce does <>better and cheaper<> then a human ever could. Human slave labour? Why bother when it’s cheaper to buy and fuel a robot that outperforms humans by a long shot?

I don't see this at all. It’s the same techno-fantasy that people have been talking about for the best part of 100 years, it's completely unfounded. There have been unbelievable advances in automation over the last 100 years and huge population increases yet we maintain near full employment. Any advances in the near future won't have anywhere near the same impact as 20th century automation. The idea that human workforce is on the brink of replacement is a joke (peak oil or not).

At Monday, December 26, 2005 at 3:29:00 PM PST, Blogger Omnitir said...

Chris, have you read this interesting essay?

Humanoid robots are rapidly advancing, and in the decades to come, could conceivable outperform a human in both physical performance and cost. In terms of automation, previous advancements have been trivial compared to what we can expect with the advances in robots currently taking place. Then there is A.I. to consider.

What happens when automation makes the most sense to corporations not only for simple manufacturing-line style work, but the vast majority of manual labour? The same goes with simple "thinking labour", like the basic desk job. Will everyone go to work making robots?

I strongly recommend reading the robotic-nation site I linked to.

At Monday, December 26, 2005 at 7:04:00 PM PST, Anonymous Anonymous said...

Omnitir seems to think a job as a producer for reality television or a stint as a website builder is going to keep the lights on in his apartment and food on his table in the post-peak oil economy. On the one it's funny. On the other hand, it's sad. What sucks for the rest of us iswith so many young people thinking along the lines of Omnitir even if they are not peak oil aware. That's scary.

"Fortunately my classmates and I are preparing primarily for . . . the creative industries and the knowledge economy."

At Monday, December 26, 2005 at 11:22:00 PM PST, Anonymous Starvid said...

I think we should look at the health of the airline industry, not the the airplane industry, as the canary in the coal mine. And the big US airlines are under bankruptcy protection IIRC.

Merry Christmas!

At Tuesday, December 27, 2005 at 3:14:00 AM PST, Blogger Omnitir said...

What sucks for the rest of us iswith so many young people thinking along the lines

No, what sucks is so many greedy old farts who got to enjoy the best years of the oil age and now think along the lines of:
“Those dang kids thinking they can have a good career… they should be out in the fields working slave labour”

Though I think I can imagine why some peak oilers feel that way about younger generations. I mean personally I’d rather be going into the peak oil crisis young, fit, optimistic and full of ideas and skills for earning a living in a changing world, rather then old, bitter and in early retirement as we hit economic troubles. But then I’m sure these people’s backyard vege patches will get them through their twilight years.

At Tuesday, December 27, 2005 at 5:53:00 AM PST, Anonymous AlbertusMagnus said...

There are two airlines which have hubs here in Atlanta. One, Delta, is on the rocks in a big way.

The other, AirTran, has been profitable when all but a few other airlines are in the red, and has been adding one new plane per month to their fleet for quite some time.

The difference? Efficiency. Delta has an aging fleet of many types of plane. AirTran's fleet is all 5 years old or newer, and they only fly two types of plane. Even with newer and more fuel efficient planes, they have been adding wingtips to make their fuel efficiency even higher.

I suspect this is the trend we'll see. Wastefulness which had been viable in the past will no longer work, and you will see the old and wasteful give way to the new and efficient.

At Tuesday, December 27, 2005 at 6:56:00 PM PST, Anonymous Old Timer said...


Sorry kid, but the trolls are correct. Your "knowledge economy" degree is a one-way ticket to a life of debt peonage.

Enjoy the good times while they last cause your generation is 100% hosed.

I'll be enjoying the fresh veggies from my very large garden while you bust your ass for a pot of grule and a cheap cot.

-Old Timer

At Wednesday, December 28, 2005 at 2:52:00 AM PST, Blogger Omnitir said...

I’d just like to say I intended no disrespect to anyone except the age nazi’s.

Regarding knowledge/information economics, I’d like to ask the sceptics why they think working from home won’t be a future trend in a world with increasing transport costs? The evidence certainly indicates it will continue to be a sector of growth.

At Saturday, December 31, 2005 at 11:13:00 AM PST, Anonymous Anonymous said...

They must be in the "power down" group, when oil has virtually nothing to do with electricity generation.

I don't understand how a "knowledge economy" is unlikely in a world facing a *transportation* crisis either, but whatever. We'll see.

In any case it doesn't matter, if my networking security degree gets hosed I'll read some books on gardening, not that you'll be able to feed yourself out of a backyard garden if you live in a cold area anyway. A hydroponic garden would be pretty nifty though.

At Sunday, January 1, 2006 at 10:59:00 PM PST, Blogger Roland said...

Your "knowledge economy" degree is a one-way ticket to a life of debt peonage.

I disagree. Can anyone name anything better for the IT industry than a world in which it's to expensive to drive to work? Viva telecommuting.

At Thursday, August 20, 2009 at 11:42:00 AM PDT, Anonymous Galen said...

Revisiting this article in 2009,watching the little blue line on the Boeing graph drop precipitously. Looks like the canary is gasping; time to get out of the mine!


Post a Comment

<< Home