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A Decade of Change in Fuel Prices and U.S. Domestic Passenger Aviation Operations

Posted by Content Coordinator on Monday, March 26th, 2012

U.S. DEPARTMENT OF TRANSPORTATION

Over the past decade, significant events have impacted U.S. domestic passenger aviation operations. These events include, but are not limited to the following:

•    March to November 2001 and December 2007 to June 2009 economic recessions;
•    September 11, 2001 terrorist acts;
•    Severe Acute Respiratory Syndrome (SARS) outbreak in 2002;
    Airline mergers, including: American with Trans World (TWA) in 2001, US Airways with America West in 2005, Delta
      with Northwest in 2008, United with Continental in 2010, and Southwest with AirTran in 2011;
•    Adoption of new technologies such as the Required Navigation Performance (RNP) flight guidance technology to fly
      more direct routes and thereby reduce fuel requirements;
•    Streamlining of operations, including but not limited to the replacement of older aircraft with newer, more fuel efficient
      aircraft; and
•    Upward trend in the cost of fuel.

This report looks at changes in U.S. domestic passenger aviation operations that have occurred during the same time frame as the events listed above, with particular focus on those related to fuel price increases. Major findings include:

•    Fuel price increases over the past decade coincided with reduced profits and, in many cases, operating losses among
      carriers.  Operating costs include, but are not limited to, flying operations, maintenance, and passenger service.
•    Airfares trended downward despite an upward trend in fuel costs. The downward trend in airfares coincided with
      increased decoupling of airfares with services, such as baggage check, reservation changes, and food and drink
      purchases, all of which accounted for a larger portion of total revenue in 2010 than in 2000.
•    Carriers reduced capacity on many routes when the cost of fuel was high.
•    Carriers improved the number of available seat miles (ASMs) flown per gallon of fuel (fuel productivity) and the number
      of gallons consumed per block hour (fuel efficiency).  This improvement coincides with airlines using newer and more
      fuel efficient jets.

Fuel Cost and Operating Expenses

In June 2011, U.S. air carriers with an annual revenue of $20 million or more paid on average $2.94 per gallon of fuel for scheduled and nonscheduled domestic service—5 percent more than what they paid in June 2010 and 51 percent more than what they paid in June 2000 after adjusting for inflation (see figure 1).

The rise in the cost of fuel since 2000 has resulted in fuel becoming one of aviation’s largest operating expenses. In 2000, the cost of labor was 2.5 times that of fuel, but in 2010, the cost of labor and fuel were nearly identical with each accounting for about 25 percent of all operating expenses (see figure 2).

 

Read full report (PDF) here: A Decade of Change in Fuel Prices and U.S. Domestic Passenger Aviation Operations

About the US Department of Transportation
www.dot.gov
“The mission of the Department is to:  Serve the United States by ensuring a fast, safe, efficient, accessible and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future.”

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