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Low oil prices cut US airline fuel costs and boost profits by 241.3pc
US Bureau of Transportation statistics show that lower crude oil prices in recent years have meant lower fuel costs and higher profits for passenger airlines.
American passenger airlines' collective net profit increased 241.3 per cent year on year to US$25.6 billion in 2015, reports the American Journal of Transportation.
Much of that increase is attributed to lower expenditures for kerosene-based aviation fuels, which fell by $16.5 billion from 2014 to 2015. Jet fuel spot prices remained favourable for airlines in 2016, averaging $1.25 per gallon, compared to an average of $1.53 per gallon in 2015, well below the average of $2.92 per gallon over the 2011-14 period.
As a share of total operating expenses, the cost of labour was nearly equal to fuel expenses in 2014. Fuel costs decreased significantly in 2015 as jet fuel prices declined, said the agency.
Many airlines hedge their fuel expenses by locking in fuel prices as insurance against the volatile nature of fuel prices; however, these fuel hedging efforts likely declined as fuel prices trended downward, it said.
Recent increases in airlines' net profits have likely lessened capital constraints on efforts to modernise commercial fleets through purchases or leases of new, more fuel-efficient aircraft.
During periods of rapidly increasing jet fuel prices, airlines were also motivated to introduce cost-saving measures, such as increasing the efficiency of their operations and fleets.
Operational changes such as increasing flight load factors (ie, reducing the number of empty seats) and changing the routes and speeds flown can also increase fuel efficiency, it said.
American passenger airlines' collective net profit increased 241.3 per cent year on year to US$25.6 billion in 2015, reports the American Journal of Transportation.
Much of that increase is attributed to lower expenditures for kerosene-based aviation fuels, which fell by $16.5 billion from 2014 to 2015. Jet fuel spot prices remained favourable for airlines in 2016, averaging $1.25 per gallon, compared to an average of $1.53 per gallon in 2015, well below the average of $2.92 per gallon over the 2011-14 period.
As a share of total operating expenses, the cost of labour was nearly equal to fuel expenses in 2014. Fuel costs decreased significantly in 2015 as jet fuel prices declined, said the agency.
Many airlines hedge their fuel expenses by locking in fuel prices as insurance against the volatile nature of fuel prices; however, these fuel hedging efforts likely declined as fuel prices trended downward, it said.
Recent increases in airlines' net profits have likely lessened capital constraints on efforts to modernise commercial fleets through purchases or leases of new, more fuel-efficient aircraft.
During periods of rapidly increasing jet fuel prices, airlines were also motivated to introduce cost-saving measures, such as increasing the efficiency of their operations and fleets.
Operational changes such as increasing flight load factors (ie, reducing the number of empty seats) and changing the routes and speeds flown can also increase fuel efficiency, it said.
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