American Airlines hopes to save $45 million in fuel costs this year -- $1 at a time.
As the summer travel season kicks into high gear, the Fort Worth-based airline has intensified its fuel conservation program, urging employees to focus on saving fuel.
The program, "Fuel Smart," got an internal Internet site this week to help coordinate efforts among flight crews, maintenance workers and dispatchers. American officials estimate they can save $45 million annually through initiatives designed to reduce fuel use.
That would be on top of $110 million in fuel that American has saved through other measures.
"We are monitoring things constantly," said Steve Chealander, a pilot who is also American's manager of flight operations efficiency. "And there's a lot more that we can do."
That emphasis inspired Tom Murray, a pilot and check airman for American's A300 Airbus jetliners to whip out his credit card last month when he figured he could save the company several thousand dollars.
Forced to land at a military base in Key West, Fla., by a storm, he learned that a private vendor was going to charge $3.50 per gallon.
He asked how much the Navy would charge and was told he could refuel for $1.36 a gallon. He bought 3,800 gallons from the Navy, putting more than $5,000 on his credit card, Chealander said. The airline reimbursed Murray and saved more than $8,000.
"That was a case of a pilot paying attention to the details, and he was able to make a substantial savings," Chealander said. "That's the kind of thinking we're trying to inspire."
Fuel savings are crucial to American, which has been buckling under the rising price of oil for more than a year. In 2004, the airline paid $1 billion more for fuel than it did the previous year, wiping out much of its savings from labor concessions and other cost cuts.
In the first quarter this year, fuel cost American $247 million more than in the first quarter of 2004. If fuel costs had been unchanged, the airline would have made a profit for the quarter; instead, the company lost $162 million.
"With the sudden and catastrophic rise in fuel costs over the past year, a more intensive approach to fuel conservation is necessary," Chief Executive Gerard Arpey told employees in a memo this week.
Airline analysts say fuel costs continue to be a major factor preventing an industry recovery.
"We do not see any of the major hub airlines returning to profitability for 2005 or 2006 with oil prices over $50 a barrel," Calyon Securities analyst Ray Neidl said in a recent note to investors. "It is clear that this situation cannot continue."
Some areas for employees' focus are:
Reducing fuel burn while planes are parked at the gate by plugging into new ground power units at airports. American has bought 21 power units to install at six airports this summer.
Taking off with airplane water tanks 75 percent full to reduce weight and fuel burn.
Optimizing airspeed, route and altitude.
Packing cargo holds so that planes are better balanced.
Refueling at the cheapest airports. Jet fuel costs less at Dallas/Fort Worth Airport than at Los Angeles International, so planes flying between those cities should fuel up in Texas rather than LA.
"If we can make improvements that save the company even a little each day on every flight, it will significantly affect our bottom line," Bob Reding, American's senior vice president of technical operations, said in a memo to employees.
Arpey emphasized that the program will continue even if fuel prices drop.
"We need to be fuel-smart no matter what the price of fuel," he said.
In the Know
American Airlines burned 729 million gallons of fuel in the first three months of the year, costing nearly $1.1 billion.
An engine on a taxiing MD-80 airliner burns as much fuel as 90 sport utility vehicles driving 60 mph.
The average two-hour MD-80 flight consumes more than 2,100 gallons of fuel. A five-hour Boeing 767 flight burns 7,500 gallons.
American refuels its planes 60,000 times a month.
Fuel has grown to 26 percent of American's costs from 14 percent in 2001. It is the airline's second-largest cost after pay and benefits.
Crude oil prices remained above $55 per barrel this week, up more than 80 percent since 2001.
