British-based business class airline Silverjet announced today that it was grounding its planes as high oil prices force airlines to consolidate to survive. This from Bloomberg:

Silverjet, which never made a profit in 16 months, was the last of three business-class only operators flying between London and the U.S. following the bankruptcy of Eos Airlines and MAXjet Airways Inc. More than a dozen carriers have collapsed in the past six months after the price of oil jumped 41 percent. The industry may report $40 billion in combined losses this year, more than three times the level after the Sept. 11 terrorist attacks, according to independent airline analyst Chris Tarry.

Oil is trading near $127 a barrel, compared with about $55 when Silverjet started flying on Jan. 25, 2007. Higher fuel expenses have contributed to the collapse of other airlines in recent weeks, including long-haul budget carrier Oasis Hong Kong Airlines Ltd., Columbus, Ohio-based Skybus Airlines Inc. and Frontier Airlines Holdings Inc. of Denver. Carriers everywhere are seeking to cut costs and some have begun charging for items such as snacks and checked luggage.

Despite the problems facing airlines, the US Dow Jones Transportation Average is soaring, says Martin Denholm in The Smart Profits Report.

“With the index made up of airlines like American (NYSE: AMR), Continental (NYSE: CAL), JetBlue (Nasdaq: JBLU) and Southwest (NYSE: LUV), plus shipping companies FedEx (NYSE: FDX) and UPS (NYSE: UPS) – all of which are buckling under the weight of high oil and gas prices – economists are now hotly debating whether it’s throwing the market a curveball.

“Traditionally seen as a sign of US economic strength and turnarounds, the fact that the index is soaring while consumers and the economy are struggling is a source of confusion … Oil prices and the Dow Transports usually move in opposite directions – and you’d think that with fuel being the biggest expense for Transportation Index companies and high oil prices pressuring so many areas of the transportation sector, the index that represents these firms would also be under severe pressure.

“Against the odds, the Dow Transportation Index is one of the market’s best performers, with some of the companies within it still going strong. Choose wisely and you could grab profits from a sector that many investors wouldn’t even consider at the moment.”