Higher 1Q Fuel Costs Raise US Airlines' Expenses, Cost Study Says

CHICAGO_Higher fuel prices helped push costs for U.S. airlines 10.6 percent higher in the first quarter of 2007 compared with the first quarter of 2006, according to a study by the Air Transport Association.

During the same period, the U.S. Consumer Price Index rose just 2.4 percent, the study released Friday said.

John Heimlich, chief economist for the commercial airline industry trade group, said airlines were able to compensate for higher costs with a 16.7 percent improvement in fuel efficiency, and "continued vigilance on other controllable items." Airlines have been eking out cost savings on aircraft maintenance, advertising and promotion and other items, the ATA reported in its Quarterly Airline Cost Index.

Overall unit operating cost per available seat mile, a standard industry measure, fell 3.8 percent in the first quarter, from 12.64 cents to 12.16 cents, as airlines increased their efficiency.

The average break-even load factor, or number of filled seats per plane, dropped 4.3 points to 77.4 percent

The composite index for U.S. airlines' costs rose to 182.9 in the first quarter, the ATA said, with fuel costs rising 12.6 percent, to an average of $2.06 per gallon (54 cents a liter).

Labor edged out fuel as the single greatest expense for airlines, accounting for 24.5 percent of average total costs in the period, compared with 23.4 percent for fuel. But, in the first quarter of 2007, the average industry cost for employing a full-time worker fell $2,042 (?1,499) to $71,193 (?52,267), the cost study reported.

The Air Transport Association reports quarterly cost information to the U.S. Department of Transportation.