Fuel Costs To Airlines

I have read that the widespread devastation to Gulf Coast oil production from Hurricane Katrina is resulting in soaring jet fuel prices for airlines and creating possible fuel shortages in southern states that could drive prices even higher. Analysts say the escalating costs could push some carriers out of business or into bankruptcy.

It is estimated that 8.4 million gallons of jet fuel a day aren't reaching the market, pushing prices up almost 41 cents within the first week after Hurrican Katrina . Airline economists expect fuel prices will continue to rise if refineries along the Gulf Coast remain off line for an extended period. "We have lost about 13 percent of our jet fuel production in the Gulf region," Heimlich said. At the same time, at least 10 southern airports are in danger of running out of fuel as the industry scurries to find a way to replenish supplies. "In Las Vegas, Orlando, Tampa and Fort Myers, we are carrying enough fuel for the flight in and flight out," spokesman Kurt Ebenhoch said Wednesday. Ebenhoch said the airline prefers not to carry extra fuel because the added weight makes it more expensive to fly, but it has no choice.

Spirit Airlines could run into shortages in Orlando and Tampa but will carry extra fuel to avoid having to refuel at those airports, said spokeswoman Rebecca Rivera. "For northern flights out of Florida, we also may stop in Myrtle Beach (S.C.) for refueling so we can continue to fly with a full load of passengers," Rivera said.

While fuel shortages are a major concern, soaring oil prices pose a severe threat to the financially struggling airline industry. Jet fuel prices have jumped almost 79 cents a gallon since May, making it more difficult for carriers such as Northwest to stay afloat.
It costs an airline like Northwest about $17 million on an annual basis for every penny increase in jet fuel prices. Fuel is the second-biggest expense for an airline after labor.

"The airlines I'm worried about are these peripheral low-cost carriers that don't have the revenue stream to support this," said Michael Boyd, president of The Boyd Group, an aviation consulting business in Evergreen, Colo. "The price of jet juice has gone up so fast, it's going to take longer to adjust for it. But unfortunately, they have to pay for the fuel in the meantime."