First Three Months of 2003 Saw Huge Cost Increases

The Airline Transport Association reports that fuel costs were up nearly 50% for the first three months of the year; and that, at the end of March (the most-recent month reported), the year-over-year (weighted) fuel costs are up 65%.

As the ATA says, average prices paid for jet fuel are a function of both long-term contracts and spot market prices; the mixture thereof varies widely across carriers.

Fuel represents the airlines' second largest expense -- typically between 10 and 15 percent of total operating costs.

Still, fuel is considerably cheaper nowadays, relative to airlines' other expenses. In 1980-83, the ATA reminds us, fuel constituted 25 to 30 percent of airline costs.

At a consumption rate of 18 billion gallons per year, every penny paid for a gallon of jet fuel costs the industry $180 million annually. Rising energy prices negatively impact airlines in two ways: higher fuel costs and dampened demand, due to a reduction in personal incomes and, consequently, discretionary spending.

The ATA notes: This report contains systemwide data filed by major, national, and large regional U.S. airlines with the U.S. Department of Transportation for scheduled and nonscheduled services. Expense figures do not include taxes, into-plane fees, or expenses associated with hedging programs. Data are preliminary and subject to restatement.

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