Flying Slow  

The Age reports that airlines are telling pilots to fly slower in order to reduce fuel consumption.

Qantas and Jetstar planes have slowed their flying speed in a bid to beat soaring jet fuel costs. Jetstar has been flying more slowly since last month to conserve fuel, adding several minutes to flights, News Ltd reported on Friday.

A spokesman for Qantas, which owns Jetstar, confirmed its planes had been using variable speed to cut fuel consumption for the past two years. A Virgin Blue spokeswoman said while it had not altered cruising speeds it was considering slowing its planes during descent.

Jetstar spokesman Simon Westaway said fuel prices had risen by 68 per cent in the past 12 months. "The challenge for airlines is that fuel costs are at record levels," he told News Ltd. "We have been conducting a trial where aircraft flights are taking a bit longer and burning less fuel. Early indications are that we are seeing positive savings in terms of fuel."

The FT reports that jet fuel prices are rising even faster than crude oil prices.

The structure of the world airline industry is going to change “profoundly”, Jean-Cyril Spinetta, chairman and chief executive of Air France-KLM, warned on Thursday, as carriers struggle to come to terms with a doubling of the oil price in the past 12 months and weakening economic growth. “There will be major restructuring. Things are changing violently and quickly,” he said.

The outlines of the winners and losers in the latest global aviation crisis are already becoming clear at frightening speed.

The long-term survivors will be the airlines with already strong balance sheets, that are going into the storm with low debt levels and big cash reserves. Many of these have taken the opportunity offered by their financial strength to hedge a large part of their fuel requirements for the next 12 to 24 months. Financially weaker airlines have been unable to afford such protective insurance. ...

Airlines likely to emerge more profitable from the crisis and with increased market shares include the European big three, Air France-KLM, Lufthansa and British Airways, from Asia Pacific, Singapore Airlines, Hong Kong’s Cathay Pacific and Australia’s Qantas and from the Middle East Dubai-based Emirates, which is using its location to build a true world hub in the Gulf.

Inevitably it is fringe players and recent start-ups that have proved most vulnerable in the first months of the unfolding crisis. Specialist all-business class carriers Maxjet Airways and Eos Airlines have already folded. So has Oasis Hong Kong Airlines, which tried to bring radically lower fares to long-haul routes between Hong Kong and Europe and North America.

Eight US airlines have already filed for bankruptcy protection this year, including established players Frontier and Aloha Airlines, and a low-cost start up, Skybus. Of the eight, five have already ceased service, including Maxjet and Eos. US carriers had a combined pre-tax loss of nearly $2bn, excluding special items, in the first quarter.

The very biggest in the US are seeking salvation in each other’s arms in the hope, possibly misplaced, that mergers and consolidation can help to cut costs. ...

Jet fuel prices are rising much faster than crude oil prices, threatening the profitability of the airline industry, as demand for middle distillates, a category that includes jet fuel but also diesel and heating oil, surges.

Since January, crude oil prices have surged by 42.7 per cent while jet fuel prices have moved 58.8 per cent higher. Analysts said that China is demanding large amounts of middle distillates with imports of aviation kerosene surging 42 per cent in April.

Analysts added that on top of strong demand, the country could be stockpiling fuels ahead of expected booming demand during the Olympics.

The WSJ also notes the mounting pain for airlines and points out that there are a number of political factors that have resulted in complex airline routes that waste a lot of fuel.

But higher fuel prices aren’t just whacking regular drivers. Ford Motor Co. threw its hands up today and ruled out profitability in 2009, and promised production cuts thanks to higher gas prices. But who’s really feeling the pain are airlines.

American Airlines’ $15 baggage fee and capacity cutbacks are expected to spark a copycat reactions through the industry. Meanwhile, according to a new study out by the Joint Economic Committee, simple air traffic congestion is wasting $1.6 billion worth of jet fuel and costing the economy $41 billion, the WSJ reports.

That should be easy to fix, right? Airlines in the U.S., Europe, and Asia have been clamoring for years to streamline air traffic control systems to cut out senseless circling and crazy, zig-zag routes that burn jet fuel, costing billions and adding to greenhouse-gas emissions. But the hurdles aren’t technical—they’re political. From today’s WSJ:

Meanwhile, Congress has been unable to pass legislation that would boost funding for a new, satellite-based air-traffic-control network, which the FAA touts as the best cure for congestion. The House passed a bill last year, but action in the Senate bogged down this month amid partisan wrangling.