November 22, 2004
Soaring oil prices have airlines scrambling to cut their fuel bills by "tankering" (cramming their tanks with jet fuel in cities where it's less expensive). Despite the added weight of extra gas, tankering saves millions.
At one point this last summer, jet fuel was so expensive in California -- $1.58 a gallon --that AMR Corp.'s American Airlines bought extra gas in Dallas for $1.16 a gallon and carried it on flights to Los Angeles to minimize refueling there.
According to John Heimlich, chief economist for the Air Transport Association:
- Every one-cent increase in the price per gallon of jet fuel costs the airline industry $180 million.
- High fuel costs are the leading reason major carriers are expected to post losses totaling around $5 billion this year.
- By some estimates, higher fuel prices could add between $4.5 billion to $6 billion to airlines annual fuel bill; American said its fuel bill will rise by $1.2 billion this year.
Frontier Airlines started tankering significantly this year, and is poised to save at least $1.8 million over a year, a significant amount for a carrier its size; UAL Corp. says United's tankering program could save up to $6 million over 12 months.
Source: Melanie Trottman, "Fill 'Er Up: Airlines Hop Around Cities for Cheaper Fuel," Wall Street Journal, November 12, 2004.
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