Copyright 2004, Traffic World, Inc.
Rising jet fuel prices couldn''t have come at a worse time for United States airlines. With United Airlines and US Airways already in bankruptcy protection and Delta Air Lines edging toward Chapter 11, the carriers are seeing their hard-earned cost-cutting undermined by the escalating price of putting aircraft in the air.
The average price of jet fuel in New York jumped from $1.287 per gallon for the week ending Sept. 10 to $1.548 by Oct. 1, according to the Department of Energy. That 20.3 percent increase in less than a month meant that the price of jet fuel had more than doubled since June 2003, when it was under 77 cents a gallon.
Even before the recent run-up, the airlines said they expected their fuel spending to grow by $6 billion this year.
That is harsh news for airlines that lost a cumulative $23 million between 2001 and 2003, and expect to lose $6 billion this year. Several experts expect the higher fuel prices to accelerate the drive toward consolidation in the passenger airline industry, slashing the common carriage capacity prized by air forwarders.
American Airlines, for instance, says each penny increase in jet fuel adds $30 million in added annual spending.
"If the current increase in oil prices year-over-year were to remain in place, we would incur more than $1 billion in added fuel expense over the coming year," said Mark Najarian, vice president of cargo sales.
Airlines have stepped up the pace of increases in fuel surcharges. Two of the world''s largest air freight carriers, Lufthansa Cargo and Cargolux, boosted surcharges to about 43 cents a kilogram last week, adding to extra charges that had been only about 10 cents a few months ago.