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Coping With Sky-High Jet Fuel PricesJohn Heimlich — VP & Chief EconomistAir Transport Association of AmericaJune 10, 2008
© ATA 2008 -- 2
The Air Transport Association of America, Inc.
Combination Services (12)
AirTran AirwaysAlaska Airlines
American AirlinesContinental Airlines
Delta Air LinesHawaiian AirlinesJetBlue AirwaysMidwest Airlines
Northwest AirlinesSouthwest Airlines
United AirlinesUS Airways
All-Cargo Services (6)
ABX AirASTAR Air Cargo
Atlas Air / Polar Air CargoEvergreen Int’l Airlines
FedEx CorporationUPS Airlines
Associate Members (3)
Air CanadaAir JamaicaMexicana
© ATA 2008 -- 3
A View from Above
“Our country’s vastness and its economy depend upon commercial aviation as the backbone of national and international commerce… Global trade undergirds America’s strength and allows the United States to project its economic power. In my opinion, the commercial aviation industry [is] a crucial component of America’s economic strength. This has been true for decades, and will remain true into the foreseeable future.”
"We are very concerned about the instability in oil prices because it wreaks havoc on how we manage our flying-hour program across the Air Force, just as it is wreaking havoc on the pricing statistics for an airline.”
“It is entirely plausible that European regulators will soon challenge the aviation industry with some type of cap on carbon emissions. Reducing the carbon footprint is a top priority for many European countries. As we continue toward synchronizing standards across international borders, we could find the U.S. aviation industry affected.”
Hon. Michael W. Wynne, Secretary of the Air Force, Aero Club of Wash., DC (May 22, 2008)
© ATA 2008 -- 4
For Whom the Bell TollsEight U.S. Airline Shutdowns* and One Bankruptcy Since End of 2007
U.S. Airline Last Day OpsMAXjet 25-Dec-07Big Sky 7-Jan-08Aloha 31-Mar-08ATA 2-Apr-08Skybus 5-Apr-08Eos 27-Apr-08Champion 31-May-08Air Midwest 30-Jun-08
Source: http://www.airlines.org/economics/specialtopics/USAirlineBankruptcies.htm
U.S. Airline Ch. 11 FilingFrontier 11-Apr-08
* Oasis Hong Kong Airlines and Silverjet are among the non-U.S. airlines that have ceased operations
© ATA 2008 -- 5
Jet Fuel Soaring Again in 2008 – and 2009?
30.38
56.6466.05
72.34
122.00 126.00
7.455.39 3.61
4.93
9.24
15.91
16.69
18.59
30.00 23.00
31.0826.18
41.51
25.98
$0
$20
$40
$60
$80
$100
$120
$140
$160
2000 01 02 03 04 05 06 07 08F* (EIA) 09F* (EIA)
Jet Fuel Crack Spread
Crude Oil (West Texas Intermediate)
Source: Energy Information Administration (www.eia.doe.gov/steo)
Ave
rage
Pric
e ($
per
Bar
rel)
© ATA 2008 -- 6
The Word on the Street
“Fuel expense…now represents approximately 40% of total industry expense following the more than 100% rise in jet fuel prices since early 2007. As a result, the impact of even a small price rise in WTI oil prices such as 2%-3% is material to the industry’s bottom-line. For example, a 3% daily rise in oil prices is enough to wipe-out an entire year’s profit… Furthermore, …there seems to be an endless supply of reasons why oil prices should go higher for the foreseeable future.”
“The industry can attempt to pass on its higher fuel costs in the form of multiple fare increases, but given the elasticity of demand, only so much can be done without substantially reducing domestic capacity. We continue to believe that there is likely to be another large cut to domestic capacity in 2H 2008 if the industry does not see any relief from record high fuel prices.”
“Energy price rise poses material risk,” Merrill Lynch Equity Research (May 8, 2008)
© ATA 2008 -- 7
The Word on the Street (Cont’d)
“Should current fuel prices persist, the impact on industry profitability is expected to rival – if not exceed – that of the 9/11 terrorist attacks.… While it may sound callous to frame fuel’s rapid ascent against the far greater tragedy of 9/11, the math is indisputable – at current fuel prices, a similar attack on the industry's profitability appears underway….” (J.P. Morgan, Apr. 15, 2008)
“Frankly, we do not believe that the U.S. airline industry can withstand $100+/bbl oil prices without major structural change and as long as the industry remains highly fragmented, sustainable profitability will remain an elusive goal.” (Merrill Lynch Airline Research, Mar. 7, 2008)
“We expect carriers to explore any and all options…to bolster their positions financially and strategically in this quickly deteriorating environment. But in a world of sustained $100+ oil, we are not convinced these actions can…offset the challenges that lie ahead. [W]ith a lukewarm economy (at best) and with carriers lapping more difficult unit revenue comps in 2H08, we foresee steep losses and cash drain continuing.” (Goldman Sachs, May 6, 2008)
© ATA 2008 -- 8
The Word on the Street (Cont’d)
“The rapid increase in jet fuel prices will add substantially to airline costs at a time when a weakening U.S. economy will make it more difficult to offset those costs with higher fares.”
“The U.S. airlines…have a relatively low proportion of their 2008 fuel needs hedged, because hedging high and volatile fuel prices is expensive and may require posting cash collateral.”
“U.S. airlines have built up their cash…liquidity over the past several years…as a cushion against adverse conditions. Unfortunately, most of them have at least part of their short-term investments in currently illiquid auction-rate securities… Thus, the airline liquidity outlook, while adequate in the near term, could come under pressure in a prolonged…deterioration in…airline industry conditions.”
“High Fuel Prices Prompt Review of U.S. Airline Rating Outlooks,” S&P (Mar. 11, 2008)
© ATA 2008 -- 9
The Word on the Street (Cont’d)
“Standard & Poor's Ratings Services said today that it placed itsratings on nine U.S. airlines on CreditWatch with negative implications, citing the potential severe financial damage from unprecedented high jet fuel prices. ‘The dramatic increase in jet fuel prices has increased airline costs significantly over the past two months, and, if sustained, could threaten their liquidity and financial profiles. Although airlines will seek to recover the higher costs through additional fare hikes and higher fees, we believe that this will prove increasingly difficult in a weak U.S. economy.’”
Philip Baggaley, “Ratings On U.S. Airlines Placed On CreditWatch Negative” (May 22, 2008)
“Airlines have no choice but to pass on the cost of fuel to consumers and when passengers do begin to push back in significant numbers the airlines have no choice but slash capacity.”
Rick Seaney, FareCompare.com, in Wall Street Journal (May 23, 2008)
© ATA 2008 -- 10
The Word on the Street (Cont’d)
“There may now be upwards of $25-$30 of speculation in the price of crude, which continue to soar despite growing stockpiles in the U.S…Traditionally, refiners made more profits…making gasoline. This, too, has changed. Sharply rising pump prices have started to eat…into domestic demand… Still, most participants seem gripped by a psychology, right now, that they must be in the oil market. This sort of herd mentality usually is adopted as a trend ages, and this one has been going on for quite a while… Sellers will not appear in any kind of meaningful way, even though there is near unanimous agreement that prices do not reflect underlying fundamentals, until there is indisputable evidence of structural economic changes: demand patterns are irrevocably altered, a commercially viable alternative is found or the global economy starts to come apart. Until then, there seems to be no stopping oil's upward thrust.”
“We’re in Shipped Shape,” MF Global Energy Risk Management Group (May 9, 2008)
“Demand from China and India, the falling dollar making oil an inflation hedge, speculation, OPEC supply restraints, supply threats in Iran, Iraq and Nigeria and refinery bottlenecks in the U.S… [W]e are now in unexplored territory…Now just this morning, Goldman Sachs has revised their ‘super-spike’scenario to $150-$200. It can not be viewed as any kind economic prescience to say that if it comes to pass, it will have an overwhelmingly negative effect on the global economy. These…tocsins were sounded at $30, and $50 and $100. Now that these milestones have quietly passed, there seems to be very little to prevent even higher prices, particularly with so much blame being assigned and no substantive solutions being proposed.”
“Rome is Burning, Lots of Fiddling,” MF Global Inc. (May 6, 2008)
© ATA 2008 -- 11
The Word on the Street (Cont’d)
“[W]e believe oil market fundamentals remain tight. Continuing demandgrowth in the non-OECD countries combined with the oil supply slowdown in the OECD and former Soviet Union are placing OPEC in a powerful position.”
Deutsche Bank Commodities Weekly (May 2, 2008)
225
325
425
525
625
7257-
Jan-
00
26-M
ay-0
0
13-O
ct-0
0
2-M
ar-0
1
20-J
ul-0
1
7-D
ec-0
1
26-A
pr-0
2
13-S
ep-0
2
31-J
an-0
3
20-J
un-0
3
7-N
ov-0
3
26-M
ar-0
4
13-A
ug-0
4
31-D
ec-0
4
20-M
ay-0
5
7-O
ct-0
5
24-F
eb-0
6
14-J
ul-0
6
1-D
ec-0
6
20-A
pr-0
7
7-Se
p-07
25-J
an-0
8
13-J
un-0
8
31-O
ct-0
8
20-M
ar-0
9
$15
$40
$65
$90
$115
$140Strategic Petroleum
Reserve (SPR) Stocks
Commercial Stocks
© ATA 2008 -- 12Sources: http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw03.xls and http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_w.htm
U.S
. Cru
de O
il In
vent
orie
s (M
illio
ns o
f Bar
rels
)DOE Filling SPR Until 6/30* at Substantial Economic Cost
Exacerbating Market Tightness, Diverting Sweet Crude Oil From Commercial StocksW
TI Crude O
il ($ per Barrel)
WTI ($/bbl)
* DOE announced on May 16, 2008, that it would “not sign contracts this year for the receipt, exchange and transportationof up to 13 million barrels of crude oil to the Nation's strategic petroleum reserve sites.”
“Taking barrels of oil off the market to put in the reserve puts upward pressure on markets.”Frank Rusco, U.S. GAO, in A.P. (May 13, 2008)
(11.9)
13.8
(35.6)(40)
(30)
(20)
(10)
0
10
20
Strategic PetroleumReserve
Commercial Crude Oil Distillate Products(including Jet)
Year-Over-Year, U.S. Commercial Petroleum Inventories Have Fallen, While SPR Stocks Have Grown
Source: Energy Information Administration (http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw03.xls)
Y-O
-Y C
hang
e in
U.S
. Cru
de O
il In
vent
orie
s (M
illio
ns)*
* Comparison of stocks between week ended May 30, 2008 and week ended June 1, 2007
© ATA 2008 -- 13
280
300
320
340
3604-
Jan
1-Fe
b
29-F
eb
28-M
ar
25-A
pr
23-M
ay
20-J
un
18-J
ul
15-A
ug
12-S
ep
10-O
ct
7-N
ov
5-D
ec
2007
2008
Source: Energy Information Administration Weekly Petroleum Status Report
2008 U.S. Crude Oil Stocks Have Consistently Trailed 2007U
.S. C
rude
Oil
Stoc
ks E
xcl.
SPR
(Mill
ion
Bar
rels
)
© ATA 2008 -- 14
© ATA 2008 -- 15
Irrational Exuberance?
“Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which the news of price increases spurs investor enthusiasm, which spreadsby psychological contagion from person to person, in the processamplifying stories that might justify the price increases and bringing in a larger and larger class of investor, who, despite doubts about the real value of an investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.”
Robert J. Shiller, Irrational Exuberance, Second Edition, 2005, p. 2
“The increasing prevalence of futures contracts has transformed the nature of oil markets. It is no longer only about the value of oil as an energy commodity, but also… oil as a financial asset.”
Goldman Sachs, “Energy Roundup: Oil Bulls Take Charge,” Oct. 19, 2007
86.8
642.7
557.9
0
200
400
600
800
1,000
1,200
1,400
World Consumption Oil Traded on Exchanges
Investors Playing Enormous Role in Crude Oil MarketsIn May 2008, Paper Market Was 13.8 Times Size of Physical Market
Sources: Citi Futures Perspective, International Energy Agency, New York Mercantile Exchange (NYMEX) and London IntercontinentalExchange® (ICE)
Dai
ly B
arre
ls o
f Cru
de O
il (M
illio
ns) i
n M
ay 2
008
© ATA 2008 -- 16
1,200.6
13.8
X
ICE
NYMEX
© ATA 2008 -- 17
“Oil Dot-com”
“[T]he size of the new flows makes a difference… Our study indicated that for every $100 million in new inflows, WTI pricesincrease by 1.6%... Our conclusion from this study is that we are seeing the classic ingredients of an asset bubble. Financial investors tend to ‘herd’ and chase past performance, comforted by the growing analytical conclusion that markets are tightening, and new inflows, in turn, drive prices higher. Larger allocations byinstitutional investors, including new sovereign wealth funds desiring to increase their commodity exposure, play a role. So does uncertainty about the true state of market fundamentals, including the level of Saudi spare capacity, the level of Chinese ‘real demand’ versus stockpiling, and other factors that buttress the current bullish consensus.”
“Oil Dot-com,” Lehman Brothers Energy Special Report (May 29, 2008)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,0005-
Sep-
06
17-O
ct-0
6
30-N
ov-0
6
16-J
an-0
7
28-F
eb-0
7
12-A
pr-0
7
24-M
ay-0
7
9-Ju
l-07
20-A
ug-0
7
2-O
ct-0
7
13-N
ov-0
7
27-D
ec-0
7
11-F
eb-0
8
26-M
ar-0
8
7-M
ay-0
8
15-J
un-0
8
Daily Total *20-Day Average
Investors Playing Increasing Role in Crude Oil MarketsComposite Crude Oil Volume* Set New Record of 1,906,016 Contracts on June 6
Sources: Citi Futures Perspective and IEA, from New York Mercantile Exchange (NYMEX) and London IntercontinentalExchange® (ICE)
Bar
rels
of O
il Tr
aded
Dai
ly o
n Ex
chan
ges
(Mill
ions
)*
© ATA 2008 -- 18
* NYMEX WTI + ICE WTI + BrentKey Factors:Weak dollar = inflation hedge desiredCapital flees real estate and stock marketPolicy (i.e., SPR) signals tighter oil markets
© ATA 2008 -- 19
“The Daze of Our Lives”
“Friday will live in the memory of participants for a long time. The task now is trying to determine why and how it happened and whatwill happen next. There is probably nowhere in the five-year history of the current rally with a comparable move that is not associated with an event of some import. A comment by a senior Israeli minister is not an event. The introduction of military forces into southern Lebanon two summers ago was an event. Obviously, speculative interests were returning to the market… While there is little doubt of the speculative value of a strategically vital commodity like oil, it can easily become overvalued from time totime. We think this is such a time.”
“The Daze of Our Lives,” MF Global Energy Overview (June 9, 2008)
© ATA 2008 -- 20
The Running of the Bulls
“So if demand growth is faltering and supply is rising, just as economics would predict should occur in the face of rising prices, just why are prices remaining so persistently strong? Partly, we believe it is because of a highly successful marketing campaign on the part of the bulls that has succeeded in getting many market participants to accept and repeat fundamental statements that sound bullish but are not necessarily factually true. We hear, “the dollar is weak,” “demand is robust,”“consumers won’t change,” “supply is disappointing,” “oil production is at a peak,”over and over again when the data suggests otherwise. We also note quite simply that there has been a long-term trending flow of buying into this market that has greatly expanded open interest and trading volume.
We hear complaints around the marketplace about how some of us just won’t see reason and give up this talk of speculation or a market bubble, but during the price even higher is not exactly convincing us that the price is fundamentally justified. On the contrary, we only see higher prices as undermining the fundamentals that much more, making it that more difficult to pin the record prices on a fundamental cause.”
Tim Evans, Citi Futures Perspective, PM Energy News & Views (June 5, 2008)
400
900
1,400
1,900
2,400
2,900
3,400Ja
n-00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
Dec
-07
Jul-0
8
Dec
-08
$15
$35
$55
$75
$95
$115
$135
© ATA 2008 -- 21
Source: Citi Futures Perspective
CFT
C C
rude
Oil
Con
trac
ts* (
Mill
ions
)Rising Crude Oil Open Interest Closely Tracking PriceOn May 13, Total Open Interest Surpassed Equivalent of 3.15 Billion Barrels
WTI N
earby NYM
EX Futures Price ($/bbl)**
* NYMEX futures and options combined; note that one contract equals 1,000 barrels
Open Interest *
Price **
“[T]he uptrend in crude oil prices over the past five years…suggests that…the buyers have been the price makers, while the more passive scale-up sellers can be considered the price takers. We also note thatthe 425% rise in open interest over this period has greatly exceeded the corresponding growth in the physical market of some 8.5% over that same span.” (Citi Futures Perspective, May 12, 2008)
** Friday settlement in the nearby NYMEX futures contract (http://tonto.eia.doe.gov/dnav/pet/hist/rclc1d.htm)
© ATA 2008 -- 22
“Bubbles in the Making”
“[B]oth trend-following speculation and institutional commodity index buying reinforce the upward pressure on prices. Commodities have become an asset class for institutional investors and they are increasing allocations to that asset class by following an indexbuying strategy. Recently, spot prices have risen far above the marginal cost of production and far-out, forward contracts have risen much faster than spot prices. Price charts have taken on a parabolic shape which is characteristic of bubbles in the making. So, is this a bubble? The answer is that the bubble is super-imposed on an upward trend in oil prices that has a strong foundation in reality... To be sure a crash in the oil market is not imminent. The danger currently comes from the other direction. The rise in oil pricesaggravates the prospects for a recession.”
George Soros, Testimony before the U.S. Senate Commerce Committee Oversight Hearing on FTC Advanced Rulemaking on Oil Market Manipulation (June 3, 2008)
© ATA 2008 -- 23
33.135.9
39.234.7
67.335.7
(33.3)17.9
5.112.8
31.814.5
20.317.1
(24.1)(13.3)
32.7(17.5)
41.23.2
21.1(11.7)(11.2)
WTI Crude OilBrent Crude Oil
Heating OilGasoline
Natural GasCoal
UraniumEUR Emissions
GoldSilver
PlatinumPalladium
AluminiumCopper
LeadNickel
TinZinc
CornLumber
SoybeansSugarWheat
Rising Commodity Prices are WidespreadEnergy Policy Contributing to Rising Prices of Corn, Crude Oil, Heating Oil, Gas
Source: Deutsche Bank Global Markets Research, Bloomberg
% Change in price since Jan. 1, 2008*
* As of June 6, 2008
Ener
gyPr
ecio
us
Met
als
Indu
stria
l M
etal
sA
gric
ultu
re
© ATA 2008 -- 24
Jet Fuel Prices Soaring – Only Partly on Soaring CrudeCrack Spread Has Returned to Hurricane Levels: Far Above $5 Historical Norm
Sources: U.S. Energy Information Administration and the Air Transport Association of America
Ave
rage
Mon
thly
Pric
e pe
r Bar
rel
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160Ja
n-90
Jan-
91
Jan-
92
Jan-
93
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Crack SpreadJet AverageCrude Oil
$30-40 crack spread
© ATA 2008 -- 25
Sources: U.S. Energy Information Administration and ATA
Dol
lars
per
Bar
rel
Distillate Inventories Declining, Jet Fuel Prices SoaringJet Peaked at $175.17 per Barrel in Los Angeles on May 22, 2008
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
$170
$1803-
Jan-
05
2-M
ar-0
5
28-A
pr-0
5
24-J
un-0
5
22-A
ug-0
5
18-O
ct-0
5
15-D
ec-0
5
14-F
eb-0
6
12-A
pr-0
6
9-Ju
n-06
8-Au
g-06
4-O
ct-0
6
1-De
c-06
31-J
an-0
7
29-M
ar-0
7
25-M
ay-0
7
24-J
ul-0
7
19-S
ep-0
7
14-N
ov-0
7
14-J
an-0
8
12-M
ar-0
8
8-M
ay-0
8
26-J
un-0
8
5-Au
g-08
14-S
ep-0
8
24-O
ct-0
8
3-De
c-08
Jet: NY HarborJet: Gulf CoastJet: Los AngelesCrude Oil (WTI)
© ATA 2008 -- 26
U.S. Refineries are Configured to Maximize Gasoline OutputTypical U.S. Refinery Yield From a 42-Gallon Barrel of Crude Oil in 2007
Source: Energy Information Administration and American Petroleum Institute
19.2
LPGs (Propane/Butane/Propylene/Butylene)
Jet Fuel & Kerosene
Heating Oil & Diesel Fuel
Naphtha*
Finished Motor Gasoline
* Feedstock for high-octane gasoline, petrochemicals and solvents
Lubricants, Waxes, Asphalt, Tar & Fuel Oils
Petroleum Coke
Light Distillates (54%)
Middle Distillates (33%)
Heavy Distillates& Residuum** (13%)
1.2
11.0
3.9
2.23.5
3.6G
allo
ns to
tal 4
4.7
due
to “
proc
essi
ng g
ain”
** Includes heavy oils used as in industry, marine transportation, electric power generation
© ATA 2008 -- 27
250
320
420
560
620
200
250
300
350
400
450
500
550
600
650
2005 2006 2007 2008F 2009F
Source: Energy Information Administration
Thou
sand
s of
Bar
rels
per
Day
U.S. Ethanol Production Displacing Conventional Gasoline
“While the backlash against biofuels has gained in intensity with rising food prices, biology is now engaged with the energy business as never before; and biofuels will be a growing part of the motor fuel pool. If ‘Ethanol’ was a country, it would have been ranked number five last year among countries in terms of production growth.”
Daniel Yergin, “Oil has reached a turning point,”Financial Times (May 28, 2008)
© ATA 2008 -- 28
($5)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$452-
Jan-
07
14-F
eb-0
7
29-M
ar-0
7
11-M
ay-0
7
25-J
un-0
7
7-A
ug-0
7
19-S
ep-0
7
31-O
ct-0
7
13-D
ec-0
7
29-J
an-0
8
12-M
ar-0
8
24-A
pr-0
8
6-Ju
n-08
6-Ju
l-08
5-A
ug-0
8
4-Se
p-08
4-O
ct-0
8
3-N
ov-0
8
3-D
ec-0
8
U.S. Gulf Coast JetU.S. Gulf Coast Gasoline
Sources: U.S. Energy Information Administration and ATA
Cra
ck S
prea
d (D
olla
rs p
er B
arre
l)Jet Fuel Premium to Gasoline Expanding Again
Differential Recently Exceeded $20 per Barrel
$10-30 Premium
© ATA 2008 -- 29
70
74
78
82
86
90
94
98
2-Jan
-0426
-Mar
-0418
-Jun-
0410
-Sep
-04
3-Dec
-0425
-Feb
-05
20-M
ay-05
12-A
ug-05
4-Nov
-05
27-Ja
n-06
21-A
pr-06
14-Ju
l-06
6-Oct-
0629
-Dec
-06
23-M
ar-07
15-Ju
n-07
7-Sep
-0730
-Nov
-0722
-Feb
-08
16-M
ay-08
8-Aug
-0831
-Oct-
08
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pnp_wiup_dcu_nus_w.htm
Util
izat
ion
of R
efin
ery
Ope
rabl
e C
apac
ity (%
)Refinery Utilization Levels Remain Below Seasonal Norms
U.S. Refineries Have Responded to Lower Gasoline Margins
Key Factors:
U.S. motorist behavior changing = less gas demandU.S. ethanol mandates = less gas demandEurope “wants” diesel, exports gasolineU.S. refineries configured to max gas, not distillates
(10.6)
(1.3)
(12)
(10)
(8)
(6)
(4)
(2)
0
Distillates** Jet Fuel
Releasing the N.E. Home Heating Oil Reserve Would Help Offset Substantial Depletion of U.S. Distillate Inventories
Source: Energy Information Administration
Y-O
-Y C
hang
e in
Sel
ecte
d U
.S. I
nven
torie
s (M
illio
ns)*
* Comparison of stocks between week ended May 30, 2008 and week ended June 1, 2007** Diesel fuel and heating oil
© ATA 2008 -- 30
$61.2
$33.1
$38.5
$22.7$15.2
$41.2
$16.4 $14.8 $12.7
0
10
20
30
40
50
60
70
2000($0.81)
2001($0.78)
2002($0.71)
2003($0.85)
2004($1.16)
2005($1.66)
2006($1.97)
2007($2.10)
2008F($3.40)
Expense ($ Billions)
Consumption (Billion Gals.)
© ATA 2008 -- 31
2008 Jet Fuel Expense1 Will Break 2007 Record Total Expense (Excluding Taxes and Into-Plane Fees) Could Exceed $60 Billion
Sources: ATA, Energy Information Administration, Department of Transportation
1. U.S. passenger and cargo airlines2. Based on $75K to employ one FTE3. Based on approx. $70M per aircraft
Equivalent of 267,000 Airline Jobs2
or 286 New Narrow-body Jets3
Note: Value in parentheses below year is average price paid excluding taxes, into-plane fees, pipeline tariffs and hedging costs
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 2Q08 4Q08
Labor Fuel
© ATA 2008 -- 32
Surging Fuel Expense Offsetting Labor RestructuringFor Passenger Airlines, Fuel CASM Has Overtaken Labor CASMU
nit O
pera
ting
Cos
t (¢
per A
vaila
ble
Seat
Mile
)
Source: ATA Passenger Airline Cost Index
© ATA 2008 -- 33
Got Milk?
“[R]aising airfares isn't like raising the price of milk at the grocery store. Consumers have almost perfect information for price comparisons – the Internet can hunt the cheapest fare worldwide in seconds. If one carrier has some empty seats to fill, it will have to cut the price because getting something for that seat is better than flying it empty. And there’s lots of competition in the industry – some airlines have lower cost structures than others, or better fuel hedges, and can absorb more of the higher costs than others.”
Scott McCartney, “As Airlines Cut Back, Who Gets Grounded?”Wall Street Journal (June 5, 2008)
Product (unit) 1978 1990 2007 GrowthCollege Tuition—Public (yr.) 1 $688 $1,908 $6,185 9.0 xCollege Tuition—Private (yr.) 1 $2,958 $9,340 $23,712 8.0 xPrescription Drugs (index) 2 61.6 181.7 369.2 6.0 xNew Single-Family Home 3 $55,700 $122,900 $247,900 4.5 xNew Vehicle 6 $6,470 $15,900 $28,800 4.5 xUnleaded Gasoline (gallon) 7 $0.67 $1.16 $2.80 4.2 xCPI (all items) 2 65.2 130.6 207.3 3.2 xMovie Ticket 8 $2.34 $4.22 $6.88 2.9 xFirst-Class Domestic Stamp 5 $0.15 $0.25 $0.42 2.8 xWhole Milk (index) 2 81.0 124.4 205.4 2.5 xGrade-A Large Eggs (dozen) 2 $0.82 $1.01 $1.68 2.0 xAir Travel-International (mile) 4 7.49¢ 10.83¢ 12.44¢ 1.7 xAir Travel-Domestic (mile) 4 8.49¢ 13.43¢ 12.66¢ 1.5 xTelevision (index) 2 101.8 74.6 16.9 0.2 x
Price of Air Travel Growing Below Average Basket of GoodsTrailing College Tuition, Drugs, New Homes, New Vehicles, Gasoline and U.S. CPI
1 The College Board (based on beginning of academic year) 5 U.S. Postal Service – www.usps.com/postalhistory/welcome.htm, Publication 1002 U.S. Bureau of Labor Statistics (includes hedonic “quality-change” adjustments) 6 National Automobile Dealers Association – www.nada.org (avg. retail selling price)3 U.S. Census Bureau – www.census.gov/const/uspriceann.pdf (median) 7 U.S. Department of Energy – http://www.eia.doe.gov/emeu/mer/pdf/mer.pdf, Table 9.44 ATA via U.S. Bureau of Transportation Statistics – www.airlines.org 8 National Association of Theatre Owners – www.natoonline.org (avg. U.S. ticket prices)
© ATA 2008 -- 34
8.49
15.20
7.4910.61
12.99
7.15
12.42
9.17
11.38
15.27
0
5
10
15
20
25
30
35
1978 2000 1Q08 1978 2000 1Q08
Actual Fare per Mile Hypothetical CPI Adjustment
Flying a U.S. Airline Remains a Bargain The Price to Fly a Mile in 2008 is Substantially Below Inflation-Predicted Levels
Sources: ATA analysis of data from seven airlines, the Department of Transportation and the Bureau of Labor Statistics
Ave
rage
Pric
e to
Fly
One
Mile
(¢)
© ATA 2008 -- 35
DOMESTIC TRIPS INTERNATIONAL TRIPS
(45%)
(47%)
© ATA 2008 -- 36
From 2000 to 1Q08, Jet Fuel Prices Overwhelming FaresJet Fuel Up 217%, Domestic Fares Down 0.5%
Average U.S. Jet Fuel Price(Cents per Gallon)
Source: U.S. Energy Information Administration
Avg. Fare to Fly 1,000 Miles Domestically (U.S. Dollars, Excluding Govt. Taxes)
70
110
150
190
230
270
310
2000
2001
2002
2003
2004
2005
2006
2007
1Q08
$125
$130
$135
$140
$145
$150
$155
$160
2000
2001
2002
2003
2004
2005
2006
2007
1Q08
Source: ATA passenger revenue report (mainline + regionals)
Down 0.5%
Up 216.6
%
© ATA 2008 -- 37
61.8
6.6 7.7
0
10
20
30
40
50
60
70
Jet Fuel Price Domestic Airfares* International Airfares*
Source: EIA and ATA passenger revenue report
% C
hang
e Ye
ar-o
ver-
Year
(Jan
uary
-Apr
il)Passenger Yield (Fares per Mile) Lagging Fuel Prices
* Fares per mile flown, also known as passenger yield
“It's very difficult for airlines to simply raise prices to levels that cover their higher fuel costs. Raising prices chokes demand: If tickets get too expensive, business travelers make alternate plans, pick cheaper airlines or buy discounted tickets further in advance. For vacationers, if prices get too high, they don't buy or they switch to cheaper destinations. Airlines can price themselves right out of a sale.”
Scott McCartney, “What to Expect as Airlines Cope With Soaring Fuel Costs,” Wall Street Journal (May 22, 2008)
© ATA 2008 -- 38
Domestic Load Factor Stabilizing (Annually) at 80%
65%
70%
75%
80%
85%
90%Ja
n-04 Apr Ju
l
Oct
Jan-
05 Apr Ju
l
Oct
Jan-
06 Apr Ju
l
Oct
Jan-
07 Apr Ju
l
Oct
Jan-
08 Apr Ju
l
Oct
Jan-
09
Monthly 12-Month Avg.
Load
Fac
tor o
n D
omes
tic U
.S. F
light
s
Source: U.S. Bureau of Transportation Statistics
55
60
65
70
75
80
85
90
95
100
Jan-
07 Apr Ju
l
Oct
Jan-
08 Apr Ju
l
Oct
Jan-
09
U.S. Consumer Sentiment at Lowest Level Since June 1980
“The recent acceleration in the loss in confidence indicates a longer and potentially deeper recession. Rising uncertainty about future living standards has caused consumers to adopt more
prudent spending plans and become more wary of incurring new debt.”
(Richard Curtin, Director, Reuters/University of Michigan Surveys of Consumers
© ATA 2008 -- 39Source: University of Michigan via https://customers.reuters.com/community/university
Key Factors:
Household debtDeclining stock pricesDeclining U.S. dollarRising food pricesRising energy pricesRising unemploymentSmall income gains
© ATA 2008 -- 40
3.02.7
3.12.8
3.1
0.8 0.7
(0.3)
1.6
3.8
(1)
0
1
2
3
4
5
6
Real GDP PersonalConsumption
IndustrialProduction
Real DisposableIncome
CPI
2008F 2009F
Source: Ameriprise Financial, “Economic Perspective” (May 15, 2008)
% C
hang
e, S
AA
R, 4
Q08
to 4
Q09
U.S. Economy Could Be Worse in 2009
“Ameriprise Financial continues to expect the U.S. economy to avoid even a mild recession in 2008, but at the risk of stumbling into a severe recession in 2009… Un-fortunately, the growth spurt in 2008 most likely will be short-lived, reflecting in large part the one-off impact from the fiscal stimulus package and the smothering effect of widespread inflation.” (Daniel E. Laufenberg, VP & Chief Economist, Ameriprise Financial)
© ATA 2008 -- 41
10%
15%
20%
25%
30%
35%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Portion of Ticket Needed to Pay for Fuel Approaching 40%Airline Fuel Expense Has Risen From 15% of Passenger Revenue in 2000
Sources: ATA quarterly airline cost index plus monthly passenger revenue report and monthly fuel cost and consumption report
Airl
ine
Fuel
Cos
t as
% o
f Pas
seng
er R
even
ue*
* Four-quarter rolling average
“If oil prices keep climbing, rising fares could start to push a significant percentage of travelers away from flying entirely. That could reverse one of the most dramatic effects of the industry's deregulation in 1978, which led to a huge increase in flights, and brought intense fare competition, opening the world of air travel to millions of people.”
Susan Carey and Paulo Prada, “American Cuts Flights, Adds Fees As airlines Face Crisis,” Wall Street Journal (May 22, 2008)
$18,005$512$574$2,136
$8,197
$428$265$554
$2,806
$1,960$573
PFC
Sept. 11th Fee
ASIFINS Fee
Customs Fee
APHIS Fees
Passenger Taxes
Int'l Dep./Arr. T
axes
Waybill Tax
Jet Fuel + LUST TaxesTOTAL
* Some taxes and fees shown include collections from non-U.S. carriers
Sources:• Department of Homeland Security• Federal Aviation Administration• Office of Management and Budget• Transportation Security Administration
DHS Collections = $3.8B
AATF + LUST = $11.4B
“Special” Aviation Taxes/Fees* Add $18B BurdenEstimated Collections Shown in $Millions
© ATA 2008 -- 42
Airfare Taxes Airfare Taxes
2008Taxes = 20% ($60)*
1972Taxes = 7% ($22)*
Airfare Taxes
1992Taxes = 13% ($38)*
Govt. Taxes/Fees on a $300 Ticket* Have Nearly TripledUncle Sam’s Bite Up Sharply Over Three Decades
*Sample itinerary assumes one-stop domestic round trip with maximum passenger facility charge (PFC) per airport; $300 total price includes taxes and fees.
© ATA 2008 -- 43
($26)
($22)
($18)
($14)
($10)
($6)
($2)
$2
$6
$1019
79
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
“It’s Only a Few Bucks per Passenger”In “Deregulated” Era, ATA Member Airlines Average $1.76 Net Loss per Passenger
Sources: ATA Annual Reports of the U.S. Airline Industry and carrier reports and www.acte.org/resources/press_release.php?id=307
Airl
ine
Net
Pro
fit p
er P
asse
nger
Enp
lane
d*
* Based on ATA-member passenger airlines only for each respective year
© ATA 2008 -- 44
1Q08 = ($10.89)
“Every time the price of fuel increases the cost of a ticket by a dollar, a percentage of travelers opt not to fly.”
Richard Crum, President, Association of Corporate Travel Executives (May 23, 2008)
Soaring Fuel Prices Will Take Toll on Airline EmploymentFull-Time Equivalent Employees at U.S. Passenger Airlines Down to 415K
400
410
420
430
440
450
460
47020
03 Apr Ju
l
Oct
2004 Apr Ju
l
Oct
2005 Apr Ju
l
Oct
2006 Apr Ju
l
Oct
2007 Apr Ju
l
Oct
2008 Apr Ju
l
Oct
2009
Source: U.S. Bureau of Transportation Statistics
Thou
sand
s of
Ful
l-Tim
e Eq
uiva
lent
s (F
TEs)
© ATA 2008 -- 45
20
40
60
80
100
120
140
160
180
2001/
2/20
01
5/2/
2001
9/2/
2001
1/2/
2002
5/2/
2002
9/2/
2002
1/2/
2003
5/2/
2003
9/2/
2003
1/2/
2004
5/2/
2004
9/2/
2004
1/2/
2005
5/2/
2005
9/2/
2005
1/2/
2006
5/2/
2006
9/2/
2006
1/2/
2007
5/2/
2007
9/2/
2007
1/2/
2008
5/2/
2008
9/2/
2008
USD Jet Fuel Spot Price
Euro Jet Fuel Spot Price
© ATA 2008 -- 46
Sources: Energy Information Administration (NYH/USGC/LA) and http://www.oanda.com/convert/fxhistory
U.S
. Dol
lar (
USD
) Equ
ival
ents
per
Bar
rel
U.S. Airlines Paying Huge Transatlantic Premium for Jet FuelUSD-Euro Exchange Rate Has Boosted Fuel Price Differential to > 55%
$55-63 Differential
$11,490
$8,251
AMR+CAL+DAL+NWA+UAUA+LCC LHA:GR
The Transatlantic BluesEquity Market Capitalization (Millions USD) on June 6, 2008
Sources: Bloomberg (for Deutsche Lufthansa AG – LHA:GR) and MSN
© ATA 2008 -- 47
AmericanContinental
DeltaNorthwest
UnitedUS Airways
Lufthansa
B-B-B-BBBBB
B+B+B+
BBBBBBBB+
BBB-BBB
BBB+A-
Sout
hwes
t
QA
NTA
S
Lufth
ansa BA
AN
A
AN
Z
SAS
TAM
JAL
Ala
ska
Nor
thw
est
Air
Can
ada
Am
eric
an
Con
tinen
tal
Del
ta
Uni
ted
AirT
ran
JetB
lue
US
Airw
ays
U.S. Carriers Suffer From Comparatively Weak CreditStandard & Poor’s (S&P) Corporate Credit Ratings as of May 1, 2008
Investment Grade
Speculative
© ATA 2008 -- 48
© ATA 2008 -- 49
2.923.06
3.84
4.94
5.76
6.11
2.5
3.5
4.5
5.5
6.5
1978 1980 1990 2000 2005 2007
Rev
enue
Ton
Mile
s (R
TMs)
per
Gal
lon
U.S. Airlines* Transport More Traffic With Less FuelFuel Efficiency Up 24% from 2000 to 2007 and 110% from 1978 to 2007
Source: ATA analysis of DOT Form 41 traffic data (T2-Z240) and gallons (T2-Z921)* U.S. passenger and cargo airlines operating worldwide – passenger and cargo revenue ton miles (RTMs) in all services
“[On]ce government creates an artificial scarcity of carbon, how the credits are allocated creates a huge new venue for political rent-seeking and more subsidies for favored industries. Some businesses will benefit more than others… Congress itself will probably take the largest revenue grab, offering itself a few more bites out of the economy and soaking politically unpopular businesses.”
“McCain’s Climate ‘Market,’” WSJ (May 13, 2008)
© ATA 2008 -- 50
Fuel Conservation Via Weight or Drag Reduction
One airline saved over 17 gallons/year per pound of weight per airplane after shedding in-flight phones, ovens, excess potable water, and some galley equipment on an older fleet
In removing seatback phones from its MD-80s and B737-400s, another airline shed 200 pounds per airplane, translating into 3,400+ gallons saved annually
Alaska Airlines indicated in March 2004 that removing just five magazines per aircraft could save $10,000 per year in fuel; also, the airline has reduced the weight of catering supplies
Air Canada considered stripping primer and paint from its 767s to save 360 lbs. per plane
JetBlue and US Airways and others have moved toward a paperless cockpit
By removing six seats, JetBlue reduced A320 weight by approximately 904 pounds
Airlines have been able to remove ovens, trash compactors, or even entire galleys, due to the elimination of hot meals on selected flights; others are using lighter seats; they have also removed magazine racks and replaced hard cabin dividers with curtains
AirTran ordered carbon fiber Recaro seats for its 737-700s to shave 19.4 pounds per row, resulting in estimated fuel savings of $2,000 per year per aircraft
Alaska’s new beverage cart, at 20 lbs. lighter, could save $500,000 in annual fuel costs
Pratt & Whitney estimates that its EcoPower engine-washing process saves Hawaiian 2.8 pounds (or $1 million) in fuel annually across the airline’s 31 Boeing 767 engines
Some airlines flush lavatories during extended ground delays to minimize takeoff weight
© ATA 2008 -- 51
Fuel Conservation Through Operational Means
En route, airlines utilize sophisticated software optimize speed, flight path, and altitude to reduce airborne consumption and avoid consuming extra fuel while awaiting a gate
ALK, AA, SWA et al have added life vests on domestic routes (e.g., LAX-CUN, DFW-MIA, MIA-NYC, AUS-TPA) to enable over-water routings in cases where they are more efficient
American redistributed cargo in the airplane’s belly to minimize fuel consumption
Alaska Airlines is deploying a new flight planning system to yield more direct routings
American and Delta use super tugs on the ground to reposition aircraft where feasible
Many have installed winglets to reduce drag – est. fuel savings of 3%-4% per B737-700 flight
Several airlines taxi in on one engine when conditions permit; AA saves $10-$12 million/year
American, Southwest, and others are using ground power to provide electricity and ground-conditioned air, rather than the plane’s auxiliary power unit (APU)
Delta has deployed a decision support tool to provide pilots with coordinated speed adjustments, allowing more evenly spaced landings and less airspace congestion @ ATL
Most airlines have reduced excess fuel on international flights with FAA approval thanks to more precise navigation allowed by GPS and better wind forecasts
New “end-around” taxiway at ATL will save airlines $26-$30 million per year; DFW is next
Delta estimates saving 400 pounds of fuel per flight from continuous descent arrivals @ ATL
© ATA 2008 -- 52
Fuel Conservation Through ATC ReformTestimony of Mike Cirillo, FAA VP-Systems Operations Services (Feb. 15, 2006)
The introduction of Domestic Reduced Vertical Separation Minima (DRVSM) doubled the number of usable altitudes between 29,000 and 41,000 feet, allowing greater access to fuel-efficient routes previously unavailable due to increase separation requirements; FAA estimates savings at $500M/year
Area Navigation (RNAV) procedures promote reduced fuel usage through more efficient climb and descent gradients; shorter, more predictable, and more repeatable ground tracks, and reduced delays; annual benefits estimated at tens of millions of dollars at ATL and DFW
Required Navigation Performance (RNP) uses on-board technology that allows pilots to fly more direct point-to-point routes reliably and accurately; gives pilots lateral guidance and vertical precision; allows more efficient airspace management and reduces fuel burn
Florida airspace redesign reduced flight distances on standard arrival and preferential routes into south Florida airports, re-routes into adjoining foreign airspace, and departure delays from BOS/NYC/WAS airports to south Florida; FAA estimates $20M/year in savings
Advanced Technologies & Oceanic Procedures (ATOP) reduces current separation minima from 100 nautical miles to 50 (or 30 for equipped aircraft); permits more aircraft to access more fuel-efficient trajectories because routes can be spaced more closely together, and aircraft can operate more closely in trail; more efficient trajectories allow aircraft to operate on better time tracks with less excess fuel, consequently allowing them to carry extra payload; estimated to save airlines about 6.5 million pounds of fuel (or about $8 million a year) on oceanic flights from the U.S. to the Caribbean and South America
User Request Evaluation Tool permits controllers to predict potential aircraft-to-aircraft and aircraft-to-airspace conflicts earlier, allowing them to construct alternative flight paths or cancel climb or descent restrictions; addresses conflicts strategically rather than tactically, with fewer deviations to the route or altitude and less restrictive climb or descent profiles; estimated FY05 savings = 25M aircraft miles
See www.faa.gov/ats/ato/drvsm/benefits.asp
© ATA 2008 -- 53
Potential Benefits of NY/NJ/PHL Airspace RedesignFAA Press Release, Fact Sheet and Briefing (Sept. 5, 2007)
On Sept. 5, 2007, the FAA called for new flight patterns over five states and new procedures that will affect more than 15 FAA facilities
New plan combines high- and low-altitude sectors to create more efficient arrival/departure routes, reducing delays while improving safety (less complexity and voice communications)
Integrates NY TRACON airspace with portions of surrounding en route centers’ airspace; allows controllers to direct IFR traffic more efficiently; improves use of available runways
Key (estimated) benefits are:
20% reduction in airport delays over five-year period of implementation
12M fewer minutes of delay annually, yielding up to $9B in benefits to air carriers, passengers and local businesses in 2011
Saves $248M/year in direct operating costs plus $37M in severe-weather delay costs
600,000 fewer people exposed to noise
See http://www.faa.gov/airports_airtraffic/air_traffic/nas_redesign/regional_guidance/eastern_reg/nynjphl_redesign/
© ATA 2008 -- 54
Are We Experiencing Continental Drift?LGA to DCA: “Growth” in Block Time Costs $9.9M Annually ($879 per Flight)*
50
55
60
65
70
75
80
8519
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Monthly
Annualized
Source: ATA analysis of DOT T-100 segment database
Ave
rage
Blo
ck M
inut
es fr
om L
GA
to D
CA
Minimum 60.4Maximum 74.9Difference +14.5
* Assumes $60.46 per minute in direct (aircraft) operating costs per http://www.airlines.org/economics/specialtopics/ATC+Delay+Cost.htm
© ATA 2008 -- 55
U.S. Airlines Have Steadily Improved Fuel Efficiency
47
49
51
53
55
57
59
61
63
65
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008Source: ATA Airline Cost Index
Airp
lane
Fue
l Effi
cien
cy (A
SMs
per G
allo
n)
“It isn’t hard to make the case that…it will cost aviation more than other industries to reduce its CO2 emissions, that aviation accounts for only 2-3% of current CO2 emissions and would remain a lesser contributor in an unregulated future, and that aviation’s value to society and the world economy justify favorable treatment.”David Bond, “For Aviation’s Greenhouse-Gas Emissions, It’s Technology Versus Growth,”Aviation Week & Space Technology (Aug. 20, 2007)
© ATA 2008 -- 56
Fuel Economy of Light-Duty Vehicles Has Fallen Since 1990Over Two Decades: Heavier, Faster and Less Fuel-Efficient
18.0
18.5
19.0
19.5
20.0
20.5
21.0
21.5
22.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: U.S. Environmental Protection Agency, “Light-Duty Automotive Technology and Fuel Economy Trends: 1975 through 2007” (EPA420-S-07-001)
Adj
uste
d EP
A “
Rea
l-Wor
ld”
Fuel
Eco
nom
y (m
pg) “In 2006, EPA revised the methodology by which EPA estimates adjusted
fuel economy to better reflect changes in driving habits and other factors that affect fuel economy such as higher highway speeds, more aggressive driving, and greater use of air conditioning. This is the first report in this series to reflect this new real-world fuel economy methodology…”
1987 2007Adj. Fuel Econ. (mpg) 22.0 20.2Weight (lbs.) 3,221 4,144Horsepower 118 2230 to 60 Time (sec.) 13.1 9.6% Truck Sales 28% 49%% Four-Wheel Drive 10% 28%% Diesel 0.3% 0.1%
© ATA 2008 -- 57
Fuel Efficiency of U.S. Airlines Up 30.8% Since 1990,U.S. Motorists (Personal Vehicles) Down 4.7%
80
90
100
110
120
130
140
150
1990 1995 2000 2005 2010
Fuel
Effi
cien
cy In
dex
(199
0=10
0) U.S. Airlines
Up 30.8%
“The FHWA’s ‘Traffic Volume Trends’” report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads…fell [for]…the first time since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.”
Source: ATA and “Americans Driving at Historic Lows,” Federal Highway Administration, May 23, 2008 (http://www.dot.gov/affairs/fhwa1108.htm)
U.S. Airlines
Up 30.8%
U.S. Motorists
Down 4.7%
© ATA 2008 -- 58
Potential Environmental Benefits of ATC ReformPromoting a Single European Sky
IATA CEO Giovanni Bisignani“Airlines Seek Unified Air Traffic System for Europe” (Oct. 18, 2007)
“Europe has achieved a single currency…but the 34 European air navigation service providers are living in a completely different age, wasting 12 million tons of CO2 annually in delay and inefficiencies…. If we could shave even just a minute off every commercial flight, the potential savings are 5 million tons of CO2 and $3.8 billion.”
© ATA 2008 -- 59
World Consumption of Petroleum Continues to GrowRapid Growth of Chinese Economy Has Helped Drive Total Toward 90M bbls/day
0
10
20
30
40
50
60
70
80
90
1995 2008F
USA Canada Europe CIS Japan China Rest of World
Source: Energy Information Administration
Mill
ions
of B
arre
ls o
f Pet
role
um (O
il) p
er D
ay
© ATA 2008 -- 60
USA Accounts for Only 10% of Crude Oil Production Estimated Share of World Production, 2008F
North Sea5%
Mexico4%
Canada4%
USA10%Other
16%
China4%
OPEC42%
FormerUSSR15%
Source: Energy Information Administration
Algeria, Angola, Ecuador, Indonesia,
Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE,
Venezuela
© ATA 2008 -- 61
Unlike Crude Oil, Most U.S. Demand for Jet FuelCan Be Accommodated Via Domestic Production
20.51
1.61
5.11
1.47
0
5
10
15
20
25
Crude Oil Jet Fuel
Consumption*
Production
Source: Energy Information Administration
Mill
ions
of B
arre
ls p
er D
ay (2
008F
)
* Jet fuel consumption includes U.S. and non-U.S. airlines, air freight, corporate aviation, air taxis, etc.
