Creative Ways to Cut Airline Fuel Costs
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
One of the largest costs for airline operators is fuel. Southwest Airlines (NYSE: LUV) was able to offset this large cost for years by hedging contracts for their fuel. This is partly what allowed them to maintain their status as the low-cost operator and forced competitors to lower their prices below operating costs just to compete. Back before Southwest’s fuel contracts expired, I worked for their competitor American Airlines at a regional airport. American Airlines lost money on every flight that they sent to the hub because they were forced to price competitively with Southwest. When Southwest was nearing the end of their fuel contracts they began to make cuts elsewhere, refusing to give up their competitive advantage.
Some airlines have found more creative ways to keep their fuel costs low. Singapore Airlines’ budget unit Scoot allows coach passengers to rent an iPad full of movies, music, games and TV shows for just $17. The company said that this change reduced the weight of its four Boeing (NYSE: BA) 777 aircrafts by 7%. This directly correlates to fuel costs. Less weight means that the aircraft will require less fuel for the same journey. This can really add up for an airline over time. Jetstar, the budget offshoot of Qantas Airways has also started offering iPads on flight over two hours that can be rented for $10-$15.
Delta Air Lines (NYSE: DAL) recently began testing video downloads on planes flying longer U.S. Routes. Passengers can download movies and TV shows to their laptops for prices ranging from $.99 to $6. Later this year they also plan to allow downloads to other devices. This is a great offering because most travelers these days normally fly with some type of device, whether it be a laptop, smart phone, or tablet, to keep them entertained or on task. It also helps in that the airline does not have to actually provide the device, cutting costs even further.
Removing the seat-back displays, equipment, and wiring for inflight entertainment can shed thousands of pounds across airline fleets. That is a big deal when the cost of jet fuel is up 36% in just two years. The savings are so dramatic because some of the older entertainment systems can weigh 13 pounds per seat or more. The entertainment systems on a 526-seat Airbus 380 could easily add up to a ton per flight. However, the equipment makers say that they are not worried. The seat-back systems are already entrenched on the global fleet. Also, luxury airlines continue to expand screen size and entertainment options. For low-cost airlines, however, this could be a major added value for the passenger. And it saves the airline money on fuel as well.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
