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Tuesday, January 17, 2012

One Of The Most Impressive Cases Of Efficiency Growth We've Ever Seen

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Tuesday, January 17, 2012

One Of The Most Impressive Cases Of Efficiency Growth We've Ever Seen

Airlines don't deserve credit for much -- they're notoriously loss-making, bankruptcy-prone, and customer-aggravating.

But with oil prices elevated for much of the past decade, they have done a great job battling the need for more fuel.

The below chart shows the massive divergence over the past decade between traffic growth (as measured by passenger miles) and jet fuel demand.

Says Barclays

According to Airbus and CERA, although cumulative growth in air traffic has totaled roughly 45% since 2000, fuel consumed by the global fleet of aircraft is up less than 5% over the same period, as airlines have accelerated aircraft parking/retirements of older airplane models and ordered newer more efficient replacements at a record pace. Greater efficiency (i.e. load factors) and fleet renewal are at the heart of an airline’s competitiveness in a world where fuel is now an airline’s largest single operating cost; this became the case mid-last-decade for the first time since the late 1970’s US deregulation.

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