LONDON (Reuters) - Higher oil prices have had a traumatic effect on U.S. airlines, forcing carriers to re-examine every aspect of the way they do business in a bid to control costs.
Between 2002 and 2012, the price of jet fuel quadrupled from 70 cents per gallon to over $3. Fuel bills rose from 15 percent to more than 40 percent of the total operating costs of U.S. airlines to become their single largest operating expense.
The airlines have responded by changing almost every element of their operations - from restricting capacity growth, eliminating short routes and hiking baggage fees to instructing crews to fly aircraft more slowly and reducing the amount of water carried on board for lavatories and washing.
The results have been impressive. After peaking in 2005, jet fuel consumption in the United States has fallen by almost 15 percent, the equivalent of more than 200,000 barrels per day, according to the U.S. Energy Information Administration (EIA).
U.S. airlines’ fuel saving program is just one example of how higher oil prices over the last decade have transformed transportation, and led to demand destruction which is likely to prove permanent. Most of the fuel economies which have been implemented in the last decade will not be undone, even if oil prices fall.
“There is a strong correlation between airline mission fuel efficiency and fuel price,” the National Center of Excellence for Aviation Operations Research wrote in a recent report (“The impact of oil prices on the air transportation industry” March 2014).
“There is ample evidence that airlines adopted new operational strategies to reduce total fuel burn for the same amount of traffic,” the center concluded.
Some of the changes have been obvious. U.S. airlines have restrained growth in capacity and increased seat occupancy.
U.S. airlines measure capacity in available seat-miles while utilization is measured in revenue passenger-miles.
Between 2007 and 2013, the number of available seat miles flown in the United States was cut by around 34 billion (3.25 percent) while revenue passenger-miles rose by 6 billion (0.8 percent).
The result is that seat occupancy, which the airlines call “load factor”, has risen from around 76 percent in 2004 to almost 83 percent in 2013, according to the U.S. Department of Transportation.
While airlines have mostly maintained capacity on major trunk routes, shorter and less profitable ones with lower load factors have seen the number of seats cut or been eliminated altogether.
Carriers have also shrunk the amount of space between seats to increase the number of passengers on each flight and saved more space and weight on the aircraft by installing thinner seats.
Other changes have been much less visible. One of the biggest fuel savings has come from flying aircraft more slowly.
From the perspective of fuel consumption, there is an optimal cruising speed for each aircraft based on altitude. Flying faster increases the amount of fuel burnt.
Historically, commercial aircraft have flown on average about 8 percent faster than their optimal cruising speed. Getting the aircraft to its destination quicker to pick up another load of passengers and minimize crew cost was worth the extra fuel expense.
The trade-off between fuel consumption and time is captured in the airline cost index and implemented in the carrier’s flight management system.
But between 2004 and 2011, the average ground speed of seven major U.S. airlines decreased by 1.1 percent, resulting in an even bigger reduction in fuel consumption, according to the center for operations research.
Airlines have been pushing for other changes in crew behavior and operations. Several airlines told the operations researchers they had instructed pilots to use only one engine while taxiing around the airport in order to save fuel.
Most airlines are also trying to maximize the use of ground power for aircraft instruments, heating, cooling and starting turbine engines when the aircraft is on stand rather than using the aircraft’s own auxiliary power units (which consume jet fuel).
One airline has stipulated ground power must be plugged in within 1 minute of the plane arriving at the gate.
More than anything else, however, airlines have focused on reducing excess weight.
In most cases, airlines found aircraft were carrying more water than was actually consumed on the journey. By modeling consumption by the number of passengers and the length of the flight airlines have been able to cut the amount of water loaded on board.
The number of magazines carried has been reduced, and those that are must “pay their way”. Airlines have removed onboard ovens from flights that didn’t need heated food. Safety equipment for a water landing has been removed from aircraft which do not fly over water.
One airline told the researchers that its weight reduction program had cut the weight of a typical Boeing 777 by 700 pounds.
For some fleets, average weights have actually been cut by as much as 10-15 percent, according to the operations research center.
One of the most attractive targets for weight reduction is the amount of fuel carried on board. Aircraft must carry contingency fuel to deal with delays, storms or diversions but the reserves add significantly to aircraft weight.
Most airlines are now trying to trim the amount of contingency fuel by using modeling to estimate how much extra fuel must be carried to ensure safe operation of the aircraft based on weather conditions and the availability of alternative airports in case the flight must be diverted.
In fact, big data and computer modeling are revolutionizing most aspects of aircraft operation, but changing behavior is not always easy.
There is often a tension between trusting decisions about contingency fuel, water and flying speed up to the professional judgment of the pilots and allowing them to be determined by a computer model. In many cases pilot contracts limit the operational data which gets reported back to the airline and the ways in which it can be used.
“Two airlines noted the difficulty of enforcing the single engine taxi policy,” the operations researchers explained. “The reason for this is because pilot contracts with airlines often limit access to pilot specific performance data, which includes specific reverse thrust settings.”
Cutting fuel reserves has been a particular source of contention. “For pilots, fuel is like insurance, they take extra fuel to deal with uncertainties in flight. They more fuel the less they care if uncertainties like traffic or weather come up. For the pilot, carrying more fuel means less stress.”
But most airlines are now using computer models to encourage pilots to modify their decisions, and in some cases to compel changes in operating practices.
The result has been a huge improvement in fuel efficiency. Between 1991 and 2012, U.S. airlines cut their fuel consumption at an average annual rate of 2.27 percent per revenue passenger-mile.
Between 1991 and 2001, when jet fuel prices were stable, most of the improvement came from upgrades in the aircraft fleet. Older more fuel hungry aircraft were replaced by more modern and efficient ones. After 2004, however, most of the gains have come from network rationalization and changes in operating behavior.
(This version of the story has been refiled to fix typo in paragraph 2)
Editing by William Hardy