As jet fuel prices soar to record levels, airlines are doing more than just raising fares and passing along the costs to travelers.
To conserve fuel, some are squeezing more passengers onto fewer planes. Others are getting creative and using less paint and lighter beverage carts. And some are scheduling more direct routes and adjusting their flying to take advantage of tail winds.
Airlines have little choice. Prices for jet fuel, which now accounts for up to a third of a carrier's operating costs, surged 58 percent last year, according to Platts, a division of McGraw-Hill Co. that tracks energy prices. For some airlines, the cost has tripled in the last few years, as crude oil prices approach $100 per barrel.
"Any time you have increases in crude oil prices, the airlines are going to take a hit," said Brian Nelson, an airline industry analyst with Morningstar in Chicago. Fuel prices are "instrumental to their cost structure."
High fuel prices have forced some small airlines to close down. MAXjet Airways Inc., which offered business-class service from several US cities to London, shut down operations and sought bankruptcy protection Dec. 24, citing soaring fuel costs and the credit crunch.
Meanwhile, the owner of Montana-based Big Sky Airlines, MAIR Holdings Inc., has said it plans to stop flying and sell its planes this year, partly because of fuel costs. Big Sky currently flies between Logan International Airport in Boston and more than a half-dozen smaller cities as part of a partnership with Delta Air Lines.
But prices have hurt the ultra-competitive industry as whole. Indeed, the International Air Transport Association slashed its profit forecast for the airline industry last month, citing a "spike in fuel prices" and a slowdown in the economy. The trade group said profits probably would fall from $5.6 billion in 2007 to $5 billion in 2008 worldwide, with most of the decline coming in North America, where many airplanes are older and guzzle more fuel.
"It truly remains one of the top challenges facing the industry today," American Airlines' chief financial officer Thomas W. Horton said at an investor meeting last month in New York.
As a result, major airlines are doing things to conserve fuel. Alaska Airlines plans to replace 16 MD-80 planes with 737-800s, which use 18 percent less fuel. The carrier also began using lighter catering carts last year. And it's using satellites to fly more direct routes.
American, the largest US carrier, is modifying the tail cones on its MD-80 planes to be more aerodynamic and using beverage carts that are 20 pounds lighter than older models.
For the past few years, American has also used less paint on the outside of planes to lighten the load. Not only can paint weigh an aircraft down, it can create drag when it chips, which consumes more fuel.
US Airways is carrying less extra fuel on flights and ordering new aircraft to replace more fuel-hungry planes. It also is changing speeds while flying to take advantage of strong tail winds or other conditions.
Some airlines, including Delta, are retrofitting planes with "winglets" - vertical extensions of wingtips that improve an aircraft's fuel efficiency by roughly 3 percent.
And to avoid wasting fuel by flying half-empty planes, some airlines are flying fewer or smaller jets. Delta, for instance, ended leases on 13 domestic aircraft in the fourth quarter and canceled some flights this year.
"Some of our competitors talk about their new fuel-efficient fleets," Delta's chief financial officer, Edward Bastian, told analysts last month. "We think actually one of the best ways to manage the fuel crisis is actually not to fly the aircraft."
In addition to all the operational tweaks, airlines are still passing some fuel costs to customers. Since Labor Day, major airlines have successfully boosted prices nine times, said Rick Seaney, chief executive of FareCompare.com, an online travel site. On Dec. 20, for instance, United Airlines doubled its airfare fuel surcharge to $10 each way, and other airlines quickly matched the increase.
Seaney expects more increases this year.
"It's not hard to justify price increases when everyone sees prices going up at the pump," he said.
Nicole C. Wong contributed to this report. Todd Wallack can be reached at twallack@globe.com.
