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How to bring down fuel prices
by Senator Kay Bailey Hutchison
Published in the Austin American Statesman August 1, 2008
The average Texas family spends around $100 to fill up its truck or SUV, so imagine the financial burden facing airlines as they struggle to fuel their fleets amid soaring energy costs — a 737 aircraft burns more than 885 gallons of jet fuel per hour at cruising altitude. If costs keep climbing, the capacity of domestic air carriers will fall and affordable air travel will be a thing of the past.
Airlines report that fuel accounts for a whopping 40 percent of their operating costs. Houston-based Continental Airlines spent $84.99 per second on fuel in February 2007. Now, its fuel costs have skyrocketed to $168.76 per second. Airlines are forecast to collectively spend $61.2 billion on jet fuel this year — $20 billion more than in 2007 — and incur $10 billion in losses.
Since December 2007, eight airlines have gone out of business and two others filed for bankruptcy. It is difficult for airlines to break even, let alone turn a profit. The Air Transport Association reported that in the first quarter of 2008, average net loss reached a staggering $10.89 per passenger. Airlines have taken cost-saving measures, including limiting the number of flights on various routes and using smaller planes, thereby cutting the number of seats to conserve fuel. The decrease in supply of seats will drive up fares.
Smaller cities in Texas that rely on regional jet service are being hit particularly hard. Because of the cost of jet fuel, the smaller aircraft are not generating enough revenue to justify the flights. Wichita Falls is set to lose more than half of its daily flights when American Eagle downsizes its schedule from seven flights a day to three. American Eagle has announced similar service reductions for Longview, Tyler and Waco. Continental will cut service to Abilene, San Angelo and Texarkana in October.
Airline experts report that, by fall, passengers will feel the capacity cuts in larger airports as well, with Bush International in Houston expected to lose almost 12 percent of its seats, and an 8 percent cut slated for Dallas-Fort Worth.
In addition to higher airfare, diminished capacity will result in sweeping job losses. On July 17, Continental reported it will eliminate 3,000 jobs this fall. American recently announced a 6,800 person reduction by November.
To mitigate the effects of the fuel crisis, airlines are swapping older aircraft with more energy efficient models. Airlines also are retrofitting aircraft to be more fuel efficient. To reduce fuel consumption in flight, airlines are removing heavy ovens and are turning to lightweight meal and beverage carts.
We need a balanced plan that will help bring down fuel prices by increasing domestic production. Congress must meet the airlines' fuel savings efforts with a forward-looking energy policy to address the underlying issue of demand for oil outpacing supply.
Congress should reverse the outdated and punitive moratorium on off-shore drilling and open up the Outer Continental Shelf for exploration. Several recent national polls indicate that over 70 percent of Americans support increased domestic production.
We must bolster American oil production with clean renewable sources, including nuclear, solar and wind power. And we must conserve energy and encourage technology and innovation through tax incentives.
Congress must take action. The consequences of inaction are sky high.
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