Major U.S. carriers will spend more than $30 billion combined on fuel this year, up about 40 percent from 2004, American Airlines Chief...
Major U.S. carriers will spend more than $30 billion combined on fuel this year, up about 40 percent from 2004, American Airlines Chief Executive Gerard Arpey said yesterday.
American, the world’s largest airline, said last Friday it would suspend some flights for most of October because of the rising cost of fuel. Delta Air Lines said it would trim an unspecified number of flights, and Continental Airlines was considering doing the same.
For some carriers, fuel has overtaken labor as the largest expense in recent quarters.
American said Sept. 22 it expected to spend $5.75 billion on 3.25 billion gallons of fuel this year, up 45 percent from 2004, based on an average price of $1.77 for a gallon of jet fuel. The price has averaged $2.32 a gallon since that date.
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Airlines “are especially vulnerable because of the amount of fuel we burn and the fact that, unlike most businesses, we are seemingly unable to pass those increased costs on to our customers,” Arpey said at a speech to the Dallas World Affairs Council.
Growing low-cost airlines such as Southwest Airlines, JetBlue Airways and AirTran have increased competition with larger carriers, forcing them to offer lower fares and limiting increases on ticket prices.
To cover the rise in fuel costs between 2003 and 2005, American would have had to increase fares almost $75 per round trip, Arpey said. During that period, American’s average fare increased $15.
Whether American will extend beyond Oct. 29 its suspension of 15 daily round-trip flights “remains to be seen,” Arpey told reporters after his speech.
“We are continuing to look at whether we should do more,” he said.
The high price of fuel and the industry’s inability to pass the cost on to consumers is a “major reason” for recent bankruptcy filings of Delta, the No. 3 U.S. carrier, and No. 4 Northwest Airlines, Arpey said.
United remains in bankruptcy, while US Airways left court protection last month and merged with America West.