No matter what business you’re in, chances are you have been impacted one way or another by the recent surge in oil prices. At American Airlines and American Eagle, it is fair to say we have been impacted more than most. As of this writing, the price of jet fuel is near an all-time high. To illustrate the magnitude of the problem, every cent increase in the price of jet fuel — which obviously goes up and down with the price of oil — costs us roughly $33 million annually. At the end of last year, fuel expense represented about 15 percent of our total costs. Today it accounts for nearly 20 percent, making it our second-largest cost item after the wages and benefits we provide our employees.

The price of jet fuel for immediate delivery has increased by nearly 50 percent since last fall, and as a result we will likely pay in the neighborhood of three quarters of a billion dollars more for fuel this year than we did in 2003. For an even more dramatic comparison, if we could somehow roll jet fuel prices back to 1999 levels, we would save close to two billion dollars this year. While this cost challenge is daunting, the real fuel propelling our company’s success has always been the initiative and imagination of our people. And as they always do, the men and women of American and American Eagle are stepping up to the challenge, discovering innovative new ways to reduce the amount of fuel we burn without sacrificing safety or quality service.

One fuel-saving initiative is what we call “single-engine taxi,” whereby we use only one engine to taxi the aircraft to and from the runways and don’t start the second engine until we need it for takeoff. Another effort relates to the power that is necessary to maintain aircraft systems — including avionics, navigation systems, lights, heating and air conditioning — while our airplanes are parked at the gate. More and more, we are able to save fuel by getting the power we need from an electrical source on the ground, instead of the tradi­tional auxiliary power unit (APU). The APU is a small engine that operates on jet fuel, so the less we rely on it to provide power to the aircraft while it is parked, the less fuel we burn. We are also saving money and fuel by pushing aircraft away from the gate with tug trucks instead of engine thrust. As I wrote here a few months ago, unlike other carriers, we do not paint our aircraft. This reduces both weight and fuel consumption, and by polishing our exteriors we reduce drag and further boost the fuel-efficiency of our modern fleet.

One of the most important things we can do to conserve fuel is make sure we are carrying an appropriate amount of it on each flight. While at first glance this may not seem like a big deal, consider that on a 10-hour flight to Tokyo, an American aircraft burns 30 percent of the fuel that is onboard just to carry the weight of the fuel needed for the flight. So for every 1,000 gallons of fuel we load onto the aircraft, 300 gallons are consumed just to carry that fuel. Then consider that American refuels its aircraft 75,000 times per month. Loading the right amount of fuel on each flight is obviously very important. Fortunately, our pilots and dispatchers use the most modern weather forecasting systems available. These systems enable us to plan each flight using a route with the most favorable winds and the least amount of turbulence or bad weather. They are also able to accurately forecast the weather a given flight is most likely to encounter upon landing.

At the end of the day, the fuel issue is but one piece of the broader, ongoing challenge of making our airline run as safely, efficiently, and comfortably as possible. With luck, we will all get some relief from high fuel prices in the months to come. Fortunately for us, our success is tied less to luck than to the talent and imagination of our people. I am eternally grateful for their efforts, and all of us are grateful that you have chosen to fly with us today. Thanks, and have a great trip!

Picture of Gerard Arpey

GERARD J. ARPEY
Chairman & CEO
American Airlines