It’s almost time for ‘duh’ headlines to appear about how bad high oil prices will be for airlines and air travellers as the Middle East sees more ‘changes’ in the relationships between rulers and ruled.

Of course the news is bad. But in airline affairs such serious matters are quickly recruited by model warriors debating whether high fuel will destroy the low cost airline model, or close down the full service model.

It can do both, and was headed in that direction in mid 2008, when the crude oil fuel benchmark prices spiked at $US 145 against a weaker AUD.

If, in an extreme scenario, Saudi Arabia, Qatar, Yemen, Kuwait and the UAE come next, and the west attempts to seize control over enough of the Middle East oil fields to keep the main economies functioning amid universal chaos, what happens to the airlines will be way down the list of items of everyday concern as a doubling of petrol and diesel prices collapses consumer demand, leaves households hungry, and breaks the capacity of people and businesses to service debt.

A bad, yet far less extreme scenario was lurching into view in the middle of 2008, when fuel prices had reached a level where the US and EU carriers, low cost and full service, began to face down the inevitability of a shut down.

Those fuel price levels exceeded the practicable limits of fuel hedging for virtually everyone, since hedging comes with considerable upside and downside risks for the hedge buyer.

It was the global spread of the US recession–which for the rest of the world symbolically became the GFC in September 2008 when Lehman Bros went broke—that busted fuel prices back down to levels where airlines whether hedged or unhedged could survive.

However the turning point was exquisitely painful for some airlines which had hedged with Lehman Bros, such as Cathay Pacific, which lost both its money and  the fuel it had entrusted to the company.

The GFC inflicted deep wounds on corporate travel, slashing both activity and yields as those accounts that were still functioning migrated to the cheaper seats.

Post GFC, airlines like Qantas, and its more nimble full service rivals, have reported significant if partial recoveries in both activity and premiums paid. But they have also been outstripped in the US and EU and over shorter haul routes in Asia and on Australian domestic routes by the performance of  cheap fare low cost carriers like Jetstar, Ryanair, easyJet, Southwest and JetBlue.

Which brings us to the relative outlooks for Qantas and Virgin Blue.

It is possible that Virgin Blue CEO, John Borghetti, has over-estimated the capacity of major corporate accounts to pay a convenience and comfort premium for full service product just as it is possible that Qantas CEO Alan Joyce has overestimated the tolerance of business and self funded travellers for the Jetstar experience, which seems to be sucking the life out of the supposedly full service Qantas experience.

Neither airline can continue in business if fuel costs were to go back to where they were in the first half of 2008 and turn $140 per barrel into a floor rather than a ceiling.

It is simply not possible to keep aircraft busy at those fuel cost levels because fares can never be set high enough to recover the added burden without killing off demand to levels where no flight can ever make money.

Dwindling passengers and soaring fuel costs equal shut down for privately owned carriers, whether they are owned jets with a shredded book value,  or leased jets. There is no escape from the dismal maths of substantially higher fuel for airlines. Not even from new fuel efficient jets they can no longer afford anyhow.

But we won’t care. Everyday life in an economy confronted by the massive disruption of employment and consumption and debt servicing because of a doubling or trebling of fuel costs will not be one in which people are looking up at the sky, but inside their kitchen cupboards.