High Prices, Taxes a Drag on Airlines Nationally

Published June 1, 2006

Higher oil prices, coupled with high state jet fuel taxes, have become a serious threat to the airline industry this summer. Politicians and industry leaders are looking for ways to ease the situation for the nation’s air carriers.

“Record crude oil prices, which are expected to average nearly $70 per barrel this summer, will hamper the industry’s widespread efforts to reverse the losses that have plagued the airlines in recent years,” said John Heimlich, vice president and chief economist at the Air Transportation Association (ATA), in an April 11 press statement.

System Modernization Needed

The U.S. Energy Information Administration shows the price of benchmark crude oil averaged $63.27 in the first quarter of 2006, up 27 percent from the same period in 2005. The average price of jet fuel rose 40 cents per gallon, from $1.45 to $1.85, and will exceed $2.00 per gallon if crude oil prices stay above $70 per barrel for an extended period of time.

“These high fuel prices highlight the need for airspace modernization to mitigate fuel expenses. A modernized system could save hundreds of millions of gallons of jet fuel per year, not to mention the environmental benefits that such improved operational efficiency would produce,” said Heimlich in his statement.

— John W. Skorburg