Air Transport World

Don't blame it all on fuel. (airline financial woes)

Don't blame it all on fuel Between 1985 and 1986, U.S. airlines saw the average price of jet fuel plunge from 79.9[ to 55.3[ gallon, a 31% decline that by the industry's own reckoning saved around $3.7 billion in direct cash operating costs in 1986 alone.

Airline fuel prices did not climb back above the 80[-per-gallon ceiling until last August, peaking at an astronomical-sounding $1.39 per gallon in mid-October and apparently bringing the industry to its knees. Continental Airlines Holdings cited the rapid rise in the price of fuel as the primary reason for its recent bankruptcy filing (ATW, 1/91); AMR Corp. Chief Robert Crandall warned that Continental might have company in the bankruptcy courts, while ATA President Robert Aaronson asked for federal intervention in the pricing of jet fuel to prevent any airline failures. And as this article was prepared, Pan Am Corp. also filed for Chapter 11 protection, citing, among other reasons, the rapid rise in the price of fuel.

But despite all the hoopla surrounding the current crisis, airlines ended the 1981-90 decade paying less for fuel than they had throughout the first half ot the 10-year period. In fact, jet fuel prices peaked back in 1981 at $1.04 per gallon, while the average price of a gallon of fuel in 1990 likely was around 80[. Adjusted for inflation, the difference is even more significant, because $1.04 per gallon in 1981 is equivalent to about $1.47 per gallon in 1990 dollars using the U.S. government's GNP deflators for those years.

Believe it or not, again adjusting for inflation, the average price of a gallon of jet fuel last year was below even the 79. …

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