High oil prices ‘could trigger failures’ in travel

Crude oil prices hit an 18-month high this week sparking fears it could lead to more industry collapses.

Oil prices rose to $86.70 a barrel on Tuesday, fuelled by strong economic recovery in Asia and strong signs of recovery in the US.

Thomas Cook chief executive Manny Fontenla-Novoa said: “Many airlines have survived because the price of fuel came down and they managed to buy at $75. There’s going to be more pain.”

He said the lack of cash flow and the difficulty getting credit from banks would also hit travel firms hard, resulting in more failures.

Mike Greenacre, managing director of The Co-operative Travel, said the impact of rising fuel prices would not be felt this year because most will have hedged for the summer.

But he added: “It will be interesting to see what impact it has on summer 2011 brochures. People are going to have to understand the long-term forecast for oil.”

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