Airlines groping for savings as fuel cost soars
Written on February 9, 2008
The need for U.S. airlines to control costs is greater than ever with losses creeping back into balance sheets and shares slipping, but carriers are simply running out of fat to trim after years of restructuring.
The main culprit undercutting profits is stubbornly high fuel prices. But overall U.S. economic weakness is threatening to erode travel demand and make it more difficult to generate revenues.
Nearly all carriers — even low-cost airlines like JetBlue Airways (JBLU.O: Quote, Profile, Research) and AirTran Airways — are looking for ways to run their operations more efficiently without compromising their services in the ultra-competitive industry.
“The high fuel costs just make you look harder and harder and harder,” said Bob Fornaro, chief executive of AirTran Airways, a unit of AirTran Holdings (AAI.N: Quote, Profile, Research).
Fornaro said airlines must be creative in saving money now that much of the industry has completed a wholesale restructuring.
“Cost reductions are not necessarily what you take away easy payday loans. It’s really how you manage your assets and how you use your assets,” he said.
AirTran constantly reevaluates its route structure to add capacity in markets were it sees demand and cut capacity in markets that cannot support it.
AMR Corp’s (AMR.N: Quote, Profile, Research) American Airlines, the world’s largest airline, has set a 2008 cost savings target of $150 million — half its 2007 target. The carrier has not identified specific ways it intends to reduce its costs.
Filed in: technology.