Average Price Of Fuel Up 40 Cents Per Gallon... And Keeps Rising

The Air Transport Association (ATA), the industry organization that represents nearly all US airlines, announced Tuesday that continued rising jet fuel prices are impeding the remarkable overall progress being made by the US 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 US 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; on April 7, it reached its year-to-date peak of $2.

ATA said that US 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 efforts, however, 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.

Heimlich added that achieving significant increases in fuel efficiency will require the deployment of available technologies and procedures to change the way the US nation manages air traffic.

FMI: www.airlines.org