High Fuel Costs On The Research Proposal

Length: 14 pages Sources: 4 Subject: Transportation Type: Research Proposal Paper: #61115111 Related Topics: Singapore Airlines, Spirit Airlines, Fixed Costs, Costing Methods
Excerpt from Research Proposal :

According to these airlines, the public can help by contacting their Congress people.

According to the airlines in question, there are in fact (or have been) regulations in place in order to discourage the phenomenon of uncontrolled speculation and manipulation in world markets. These have however been weakened or removed, resulting in the rapid rise of fuel prices today. The claim is in fact that rising demand and diminishing supply cannot account for the rise in oil prices that have been experienced over the last year.

Alexandra Marks (2008) also addresses the role of the Government in encouraging higher fuel prices. According to airline industry experts and analysts, Congress is not doing enough to curb speculation. If this is not done very soon, according to these experts, the aviation industry could face a collapse in the not very far future, that is in danger of crippling the economy of the country. Marks further states that, in addition to encouraging the public to do the same, airline officials themselves have also contacted Congress in an attempt to encourage less speculation and lower fuel costs. Some believe that the Government is beginning to see the benefits of curbing speculation, while others maintain a somewhat desperate paradigm.

Many airlines therefore feel that lowering fuel prices via a curb in speculation will mitigate the crisis and provide airlines with the necessary platform on the basis of which to recover. Others however hold that this is not a viable solution in the light of the extent of the crisis. Indeed, according to Marks (2008), some analysts do not believe the claim regarding speculation to be the only or even the primary reason for climbing prices. These analysts cite issues such as demand and supply problems resulting from the economies of China and India in concomitance with political violence in Nigeria. These more direct influences on oil prices are seen to be more influential than speculation alone.

Analysts with these opinions hold that the industry will have to shrink in response if oil prices remain at their current levels. Indeed, in order to ensure that passengers can still use airlines for all their travel needs, it is projected that government help will be essential in providing assistance during such a shrinking process (Marks, 2008).

Additional Problems that impact Prices

Marks (2008) also focuses on other problems besides the fuel crisis that plague the industry. In addition to these, there are problems such as delays and a lack of service. The losses currently suffered by the industry can therefore, according to the author, not only be blamed upon government action and fuel prices. Instead, Marks notes that the industry could do much more to encourage additional passengers. High ticket and service prices could for example be mitigated for passengers by providing a higher quality of service during flights, and by ensuring that flights are not delayed as frequently. Indeed, many airlines are losing passengers not only as a result of high ticket costs, but also as a result of these additional problems. If these are eliminated, losses suffered as a result of fuel could be significantly reduced.

Marks then suggests that the government needs to take a much more active part in providing a national transportation policy in order to save the failing infrastructure.

But the major airlines are opposed to any form of regulation, claiming that deregulation has been beneficial for passengers in terms of competition and lower fares.

Some analysts are in agreement, citing the success of low-cost carriers such as Southwest Airlines to substantiate their claims. They suggest that better airline and air-traffic control system management would go a long way towards improving service delivery to passengers and also to maintain relatively acceptable costs. These analysts argue that government regulation would drive ticket prices even higher than fuel costs. In addition, it is feared that regulation would result in higher costs, but a concomitantly even...


This would not solve any of the industry's problems (Marks, 2008).

Craft Efficiency

Brian Strauss (2008) reports an entirely different angle on the rising fuel and oil costs for the airline industry. The author cites Boeing in saying that the demand for new aircraft to replace old, less efficient craft will be in high demand during the coming years. Indeed, Boeing appears to be more positive about the rising fuel costs than many other service providers, maintaining that the regional demand would be balanced, although it is projected that 29,400 new passenger and freighter aircraft will be needed by 2027.

Spokespeople from Boeing maintain that the long-term outlook for the commercial airline industry is much more positive than projected by many of the industry leaders mentioned above. While Boeing recognize the realities of the industry today, company leaders are also considering global demands over the long-term. It is projected that both passengers and freight will increase (by 5% and 5.8% respectively) rather than decrease annually. The company holds that these increases will generally be driven by better and newer aircraft to replace the old. Hence the company is focused upon long-term solutions rather than what they view as the short-term problems presented by rising fuel costs.

Measures Going too Far?

In the desperate effort of airlines to cut fuel costs, some critics have become concerned that many of these measures have become excessively extreme and may have a detrimental impact upon flight and passenger safety. Jason Whitely (2008) mentions the example of American Airlines. Specifically, the airline has started implemented measures by which to conserve fuel when filling the aircraft up for their domestic flights. While the airline maintains that it would still be within FAA guidelines for sufficient reserve fuel, it would not say by how much fuel amounts would be cut. This has led to worries not only regarding safety, but also regarding eventualities such as bad weather and delays. Such elements need to be calculated along with normal fuel usage.

While flight dispatchers and pilots have the final say in fueling practices, some feel that economics might soon play a bigger role than safety in ensuring fuel efficiency. Indeed, this seems to be the case at American Airlines, where managers have gone as far as emailing a memo to employees, indicating a certain amount of fuel for filling up the tank. If this memo was not complied with, employees were threatened with a hearing. Dispatchers in particular noted that they felt intimidated.

While commercial aviation companies have made several efforts to cut costs and save on fuel, General, smaller-scale Aviation operations have also suffered as a result.

General Aviation

Roxana Hegeman (2008) notes that the general aviation industry includes recreational and private charter flights. Not only these are suffering as a result of higher fuel costs, but also the industries that cater to such operations. Examples include piston-powered aircraft makers, pilot training schools, fixed base operators, among others.

According to the author, Cessna Aircraft Co. offers a program that includes free fuel for up to 18 months as a reward for buying Cessna 182 Skylanes or turbo Skylanes. This translates to up to $15,000 of fuel costs per sale.

Interestingly, a drop in shipments of piston-power aircraft of 28% occurred concomitantly with a rise of 41% in shipments of business jets for the same period. The author notes that this is the result of international shipments, particularly to emerging business flight markets such as India, Asia and Russia.

Recreational flyers are however using their aircraft much less than was the case in the past, even when attending gatherings that cater specifically to their market. According to a survey of the Aircraft Owners and Pilots Association, 72% of its members report flying less than they did in the previous year, and 61% of these do so as a result of fuel prices. Furthermore, flyers in the recreational field alone have reported a greater decline in flight time than those who fly for business purposes.

Hegeman (2008) reports that fuel prices for aviation have increased an average of 24% nationwide. The result is that recreational flyers tend to use their aircraft less. However, it is also reported that private business jets have not been impacted, as their owners could better afford fuel prices.

Hegeman focuses her report on Wichita, where roughly half of the pilots are leisure flyers. She cites Alyson Elder, a flight instructor, in saying that rising fuel prices will result in fewer people having the funding and ability to learn to fly. She projects that this could lead to a future shortage of pilots in the general aviation industry.

In addition to rising fuel prices, the cost of a pilot's license has also doubled over the last two years, with the price of aircraft rental also raising concomitantly with fuel prices. Hence, recreational pilots particularly find it difficult to maintain their hobby, while business pilots also see a loss in their average income.

In addition to rising fuel costs, new proposals for alternative aviation fuels have begun to…

Sources Used in Documents:


AOPA ePublishing staff. AOPA working on future avgas. http://www.aopa.org/aircraft/articles/2008/080319avgas.html

Credeur, Mary Jane. (2008, July 9). Northwest Air to Cut 2,500 jobs to Blunt Fuel Costs. Bloomberg Press. http://www.bloomberg.com/apps/news?pid=20601103&sid=aQSwxib7vM3s&refer=us

Hegeman, Roxana. (2008, July 8). Soaring aviation fuel cots ground many pilots. Forbes.com. http://www.forbes.com/feeds/ap/2008/07/08/ap5194342.html

Lynch, Kerry. (2008, Mar. 24). AOPA, Greens Battle Over Lead in AvGas. Aviation Week. http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=busav&id=news/LEAD03248.xml

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