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Rising Jet Fuel Prices Hamper Airline Industry's Extraordinary Cost-Cutting Efforts

Posted on: Tuesday, 11 April 2006, 12:00 CDT

WASHINGTON, April 11 /PRNewswire/ -- The Air Transport Association (ATA), the industry organization representing leading U.S. airlines, today said that continued rising jet fuel prices are impeding the remarkable overall progress being made by the U.S. airline industry to return to profitability.

"Record crude oil prices, which are expected to average nearly $70 per barrel this summer, will hamper the industry's widespread efforts to reverse the losses that have plagued the airlines in recent years," said ATA Vice President and Chief Economist John Heimlich. Data from the U.S. Energy Information Administration shows that the price of benchmark crude oil averaged $63.27 in the first quarter of 2006, up 27 percent from the same period in 2005. Accordingly, the average price of jet fuel rose approximately 40 cents per gallon, from $1.45 to $1.85. "These high fuel prices highlight the need for airspace modernization to mitigate fuel expenses. A modernized system could save hundreds of millions of gallons of jet fuel per year, not to mention the environmental benefits that such improved operational efficiency would produce," said Heimlich.

The industry's total fuel expense more than doubled from 2003 to 2005, and increased $10.3 billion from 2004 to 2005 alone, wiping out any chance of industry-wide profit last year. In addition, the first quarter price data suggests higher average prices throughout 2006 versus 2005. For 12 days in a row, the average price of jet fuel has exceeded $1.90 per gallon, and this past Friday, it reached its year-to-date peak of $2.

U.S. airlines continue to take aggressive measures to conserve fuel: Since 2000, the industry has increased fuel efficiency by an impressive 16 percent. Even with these exhaustive efforts, for most carriers, fuel has now tied or overtaken labor as their largest expense. On average, labor costs per seat mile declined from $3.99 in 2002 to $2.95 in the third quarter of 2005, while fuel increased from $1.23 to $2.88. As Heimlich testified before Congress on Feb. 15, achieving significant increases in fuel efficiency going forward will require the deployment of available technologies and procedures to change the way our nation manages air traffic.

The updated ATA forecast can be found online at http://www.airlines.org/ under the economics section, in the documents titled Combating the Fuel- Related Challenges Facing U.S. Airlines Slides (http://www.airlines.org/files/Airlines_Fuel.pdf) and Questions and Answers (http://www.airlines.org/news/d.aspx?nid=9194). Additional information about energy and fuel can be found at http://www.airlines.org/econ/d.aspx?nid=9726.

ATA airline members transport more than 90 percent of all U.S. airline passenger and cargo traffic. ATA Airline Members comprise: ABX Air, Inc., Alaska Airlines, Inc., Aloha Airlines, American Airlines, Inc., ASTAR Air Cargo, Inc., ATA Airlines, Inc., Atlas Air, Inc., Continental Airlines, Inc., Delta Air Lines, Inc., Evergreen International Airlines, Inc., FedEx Corporation, Hawaiian Airlines, JetBlue Airways Corp., Midwest Airlines, Inc., Northwest Airlines, Inc., Southwest Airlines Co., United Airlines, Inc., UPS Airlines and US Airways, Inc.; ATA Airline Associate Members: Aeromexico, Air Canada, Air Jamaica Ltd. and Mexicana; ATA Industry Members: Aero Instruments & Avionics, Inc.; ATR Aircraft; BAE Systems; Benfield Insurance; Bombardier Regional Aircraft; Cendant Travel Distribution Services; Embraer; Honeywell Aerospace; KPMG; Metron Aviation, Inc.; Pratt & Whitney; The Royal Bank of Scotland, plc; Sensis Corporation; SITA; TDG Aerospace, Inc.; TIMCO Aviation Services; Unisys Global Transportation; Universal Air Travel Plan, Inc. (UATP), USI Insurance; and WinWare, Inc.

Air Transport Association (ATA

CONTACT: Victoria Day, +1-202-626-4141, or Elizabeth Machalek,+1-202-626-4205, both of Air Transport Association

Web site: http://www.airlines.org/

Source: PRNewswire

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