Fuel Price Fluctuation & It’s Impact On Airlines

Introduction

The aviation industry is one that is constantly faced with instability as events such as, SARS (Severe Acute Respiratory Syndrome) epidemic, War in the Middle East namely Iraq and Afghanistan, September the 11th , rock the industry’s foundation and negatively impacts airlines. Coupled with these negative events is the issue of fuel price fluctuation that’s an economic factor that airlines have no control over. If an airline has significant cash reserves than it can opt to participate in fuel hedging,as a strategy.

IATA realizes the impacts fuel price fluctuation has on airlines financial stability and has implemented the best practices for fuel conservation for aircraft operators as well as ATS Providers. These practices have been incorporated in IATA Publication under,’ Guidance Material & Best Practices for Fuel and Environmental Management'. IATA is also working closely with airlines, air traffic controllers, Air Navigation Service Providers (ANSPs),to implement better air space design so as to try and save airlines 1min in flight, as on average airlines spend approximately $100 per minute when in flight on operating costs (labour, fuel, maintenance, etc.)1.

Airlines around the world have also taken measures to deal with fuel price fluctuation, as well as measures to conserve energy and hence improve fuel efficiency. This Wiki contribution will highlight a few measures airlines in various countries around the globe have used to deal with fuel price fluctuations as well as measures to improve their fuel efficiency.

How do airlines cope with the issue of fuel prices?

Airlines are trying to reduce fuel consumption by using various measures such as2;

  • Avoiding unnecessary tankering (that is avoiding carrying more fuel than is required to meet safety minima on a particular sector).
  • Using lighter equipment in the cabin of older aircraft’s to reduce weight.
  • Reducing aircraft speed during cruising periods.
  • Using computerized flight planning.
  • Using slower rates of climb/descent and higher cruise altitudes.

where possible with the above measures airlines may be able to save some fuel, however the biggest saving of fuel consumption comes from switching from old fleet to newer more fuel efficient aircraft; especially in cases where an airline is able to switch or replace a three or four engine jet to an aircraft with fewer and more advanced engines2.

Improving Fuel Efficiency

In addition to some of the measures used to cope with fuel price fluctuations, airlines may also3;

  • Employing single engine taxi procedures on normal operations, as well as selective shutdowns when there is ground delay.
  • Using airport power rather than onboard APUs (Auxiliary Power Units) when at airport gates.
  • Investing in winglets to cut aircraft drag (hence reducing fuel consumption).
  • Optimize flight planning for minimum fuel-burn routes and altitudes.
  • Pool resources to purchase fuel in bulk through alliances with other airlines and so forth.

Below is an example of various techniques specific airlines are using to deal with fuel price fluctuations as well as ensure fuel efficiency.

Australia

In Australia, Airlines with the aid of Airservices Australia which is an,’ Air Navigation Service Provider’, is helping airlines in the region find ways to save fuel by making use of winds on routes (causing reduction of flight time and saving fuel). Flight time is reduced by the use of ,’Flex Tracks’. Airservice Australia has a, 'whole of flight', initiative that aims at providing fuel friendly ATC service to airlines. Below are some examples of phases of flight that Airservice Australia list to reduce fuel consumption4;

Departure Phase

  • Reduce runway holding time with estimated airborne time.

Enroute Phase

  • Using Flex Tracks.
  • Flight Planning and Tracking Review.
  • Using Optimum Flight Levels.

Arrival Phase

  • Using PTL (Preliminary Landing Times).
  • Tailored Arrivals.
  • Speed control over vectoring.

Africa

This is the most affected region with fuel fluctuation as many airlines in this region do not have the finances to implement hedging or measures such as purchasing new fuel effective fleet. An example of an African country that stuggled with fuel prices was Kenya Airways who ended up having to lay off twenty three managerial staff in 2008 to deal with fuel price increases 5.

Hong Kong

One of Asia’s budget airlines, Cathay Pacific, has committed itself at modernising its fleet. It has the Boeing 747-8F and the Boeing 777-300ER, which are both known for being fuel efficient aircraft. Cathy Pacifc also charges fuel surcharge on tickets to deal with the issue of fuel price increase. This month on their website they notified their passenger that,' for travel booked offline on or after the 1st of October 2010, will be subject to new fuel surcharge6.

Saudi Arabia

Saudi Arabian Airlines, is one of the biggest airlines in the Middle East. It has a variety of new fleet that are fuel effective. The airline also has a deal with, ‘Saudi Aramco’, which is the state-owned national oil company of Saudi Arabia and receives its aircraft fuel at a discounted price7.

United States

Airlines in the United States are using the strategy of flying slower; an airline that implements this is Southwest. United Airlines also uses its own strategy where it chooses the best routes and speeds to fly with the aid of flight planning software. Other strategies implemented by airlines in the United States is; adding fuel surcharges to tickets and charging for a 2nd checked in bag rather than a 3rd which was the case in the past8.

The issue of fuel price fluctuation is one that no airline has control over, but by implementing IATA’s, ’Best Practices for Fuel’, acquiring new cost effective fleet, as well as techniques for fuel efficiency, airlines may be able to save some money. However when airlines use fuel efficient techniques they should in no way compromise the safety of flight.

Reference

1. IATA.(1886). Airline & Aircraft Operations: Fuel Conservation. Retrieved 12 October, 2010, from http://www.iata.org/whatwedo/aircraft_operations/fuel/Pages/fuel_conservation.aspx

2.Doganis,R. (2002). The Economics of International Airlines. London: Routledge.

3.Air Transport Association. (1995).Fuel Efficiency of the U.S. Airlines. Retrieved 12 October, 2010, from http://www.airlines.org/Energy/FuelCost/Pages/FuelEfficiencyoftheUSAirlines.aspx

4.Airservices Australia (2008).Australian ATM Strategic Plan. Retrieved 12 October,2010, from http://www.airservicesaustralia.com/customer/ausots/whatisaflextrack.asp

5.Afriqu en ligne.(2008).Kenya Airways lay off staff as fuel price hikes bite. Retrieved 12 October,2010, from http://www.afriquejet.com/news/africa-news/kenya-airways-lays-off-staff-as-fuel-price-hikes-bite-200805174086.html

6.Cathay Pacific Airways Limited.(2010).Fuel Surcharge. Retrieved 12 October, 2010, from
http://www.cathaypacific.com/cpa/en_SG/helpingyoutravel/traveladvisories?refID=339dd13bdd93a010VgnVCM10000021d21c39____#fuel

7.Rahimi,S.(2007). Emirates 24/7:Fuel consumes 45% of cost for Sama Airlines. Retrieved 12 October, 2010, from http://www.emirates247.com/2.277/aviation/fuel-consumes-45-of-cost-for-sama-airlines-2008-05-09-1.226987

8.Wilen,J.(2008). The New York Times :To save fuel, airlines move to slow lane. Retrieved 12 October, 2010, from http://www.nytimes.com/2008/05/02/business/worldbusiness/02iht-air.4.12528774.html


Contributors to this page

Melanie AttanMelanie Attan


Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License