Friday, June 23, 2006

Demand Management At American Airlines...

Last night after missing a family dinner at my Mother-In-Law's house because I was sitting in traffic slowly consuming $3 gas, I had the pleasure of catching the end of the NBC Nightly News, and wouldn't you know it, the one piece I saw was on a company-wide spend management effort at American Airlines to manage the consumption of jet fuel by Tom Costello. The report shows the impact that focused efforts to manage spend can have, even when the commodity trades at a market price.

Some highlights from the report:
  • American Airlines consumes about 3 billion gallons of jet fuel each year, more barrels of jet fuel than Ireland consumes of oil.
  • Every $0.01 increase in the price of jet fuel costs American Airlines $33 million.

In an industry where many players go back and forth between bankruptcy and the edge of bankruptcy, managing the demand for jet fuel -- limiting its consumption -- can literally impact the survival of the company.

Many business travelers are familiar with the fact that American Airline's polished steel planes are kept that way to save the fuel required to carry the extra weight of paint. This report highlighted things you may not have known:

  • American saved $4m by implementing a procedure for pilots to taxi back and forth to the runway using a single engine.
  • They saved an additional $3m by cutting the amount of water in half.
  • They have removed unused galleys and asked passengers to lower window shades when planes are on the ground.
  • Their operations center studies weather to route planes through the most favorable winds for fuel consumption.
  • The airline is retrofitting planes with winglets. Installing winglets on 20 transcontinental 757s will reduce American's fuel consumption by 3 million gallons. (The winglets, recently featured in this USAToday article cost about $725,000 a pair).

At American, conservation and profitability go hand-in-hand. For all of its efforts, American claimed to have reduced it's fuel consumption by 84 million gallons last year, enough to save $161 million dollars.

The report is available to view on MSNBC's website. Go to MSNBC Video and look for "Airline cuts cost in little ways."

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