New tanks, Pipes Keep Airline Tanks Full

Some U.S. airlines are stepping up investments in fuel storage and pipelines.


After narrowly avoiding jet-fuel shortages at several big airports last summer, some U.S. airlines are stepping up investments in fuel storage and pipelines, though executives say the industry is still highly vulnerable to supply disruptions.

Because of regional fuel-distribution bottlenecks, airports in California, Florida, Hawaii, Nevada, Utah and the Washington, D.C. area remain the top trouble spots, according to industry officials, who said carriers routinely fly into these markets with extra gallons onboard or schedule expensive last-minute deliveries by truck.

Nevertheless, airlines appear to be gettting better at coping with the problem, executives said, noting there have been far fewer severe fuel crunches this summer -- so far.

'It's either very encouraging or very lucky. I don't know which,' said Bob Sturtz, managing director for fuel at UAL Corp.'s United Airlines.

Executives said spending on storage, pipelines and other energy infrastructure has lagged in recent years because airlines have been more focused on limiting losses and staying out of bankruptcy at a time of soaring jet-fuel prices. But now, with a financial recovery underway as passenger traffic and airfares rise -- the industry is on pace in July to report its first quarterly profit since 2000 -- carriers have more flexibility to address the problem.

At the same time, the upswing in air travel means any supply interruptions that occur this summer are likely to be harder to manage than last year. One complicating factor is that, with more passengers onboard, airlines are unable to ferry as much extra fuel from one city to another as they could a year ago.

'Nothing has changed in terms of the fundamental tightness of the market,' said John Heimlich, chief economist at the Air Transport Association, a Washington-based trade group.

Heimlich said a major reason there are fewer flare-ups these days is that carriers have been in better communication with each other and fuel suppliers ever since last summer, when a handful of airports came within days, and at times hours, of running out of fuel.

'We're sort of old pro at dealing with this,' he said.

Still, plans are underway to chip away at the underlying problem.

One of the biggest projects on the drawing board is the construction of a 50,000 barrel-a-day pipeline to carry jet fuel from a port in Long Beach, Calif., to the airport in Los Angeles, which consumes some 100,000 barrels a day. The proposed pipeline, which would be paid for by a consortium of more than 50 airlines, could cost as much as $30 million to build.

What the industry would get in return -- a pipeline dedicated to its needs without competition from gasoline or diesel customers -- is perhaps far more valuable.

'Can the airlines really afford not to have some level of control over a key resource?' Sturtz asked.

Similarly, a consortium of airlines has worked out a major fuel-storage and delivery project with officials at Washington's Dulles International Airport and the Colonial Pipeline Co., which transports gasoline, heating oil and jet fuel from the Southeast to the Northeast.

The plan is to build a wider pipeline to feed Dulles and add an additional 300,000 barrels of storage at the airport to alleviate a perennial bottleneck. The projects, which will cost a combined $85 million, are expected to be completed by the middle of 2007.

In nearby Baltimore, Southwest Airlines Co. is spending upwards of $30 million to build three storage tanks and a hydrant pumping system along with the construction of a new terminal at the airport. The new tanks will hold a combined 90,000 barrels of jet fuel, tripling the entire airport's existing jet-fuel storage capacity by the end of next year to the equivalent of more than 11 days of demand.

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