ATA Testimony by VP and Chief Economist John Heimlich before the House T&I Aviation Subcommittee on the Impact of High Jet Fuel Prices

Commercial aviation helps drive more than 10M American jobs and 5 cents of every dollar of U.S. GDP
Commercial aviation drives more than $1 trillion per year in economic activity
In 2012, U.S. airlines moved more than 48,000 tons of cargo per day
In 2012, the value of a kilogram of U.S. merchandise exported by air averaged 121 times the value exported by sea
For every 100 airline jobs, some 360 are supported outside of the airline industry
Federal taxes constitute $61 – or 20% – of the price of a typical $300 domestic round-trip ticket
In 2011, U.S. airlines carried 16 percent more passengers and cargo using 10 percent less fuel than in 2000
Domestically, airlines drive 5% of economic activity but account for 2% of man-made GHG emissions
From 2000-2011, airlines reduced GHG emissions by 11% while transporting 16% more passengers and cargo
From 1975-2011, U.S. airlines and their partners reduced significant noise exposure by 99%
Commercial air travel is the safest form of intercity transportation in the United States
In the most recent decade, scheduled air service on U.S. airlines was seven times safer than in the 1970s
From 2000-2012, U.S. airlines improved the on-time arrival rate from 72.6% to 81.9%
From 2000-2012, U.S. airlines reduced the flight cancellation rate sharply from 3.30% to 1.29%
Airfares are a bargain: From 2000-2012, U.S. CPI rose 33% while average domestic fare rose just 13%
Adjusted for inflation, the average round-trip domestic airfare fell 15% from 2000
2007 domestic flight delays cost the United States approximately $31 billion
In 2012, the value of U.S. merchandise exported by air reached an all-time high of $427B
In 2012, U.S. exports of air-travel services reached an all-time high of $39.5B, driving a $5.1B trade surplus
In 2012, U.S. passenger and cargo airlines spent more than $50B on fuel, averaging 36% of operating expenses
In 2012, U.S. airlines posted the lowest annual rate of mishandled baggage ever recorded
FAA projects U.S. air travel demand to top 1 billion passengers in 2027
In 2012, US airlines flew 83.4 million passengers in scheduled international service - a record high
In 2012, the total value of merchandise exported from or imported to the United States by air exceeded $927 billion
In 2012, 7.15 teragrams of merchandise was exported from or imported to the United States by air

	ATA Testimony by VP and Chief Economist John Heimlich before the House T&I Aviation Subcommittee on the Impact of High Jet Fuel Prices
	PubZone1 FEBRUARY 15, 2006 Good morning. I appreciate the opportunity to address the issue of jet fuel supply and its impact on commercial aviation. ATA’s members have a vested interest in ensuring access to an affordable, reliable supply of jet fuel. Today I will describe the effect of rising jet fuel prices, provide examples of unprecedented measures U.S. airlines have taken to reduce fuel costs, and explain how modernization of our nation’s air traffic control system can help all system users minimize fuel consumption. From 1991 through 1999, jet fuel prices averaged 56 cents per gallon, and never exceeded 65 cents. The significance is not only the reasonable average price, but also its stability. It is against that backdrop that operational decisions and investments were made. Airline financial planners did anticipate higher fuel prices, but not to the extent and duration they have witnessed over the last few years. For most carriers fuel has now tied, or overtaken, labor as their largest expense. Between 2003 and 2005, the average market price of jet fuel soared from $0.88 to $1.72 per gallon. In the period during and after Hurricanes Katrina and Rita, prices in the Gulf Coast spiked to $3.13. The outlook for 2006 is no better, with experts projecting an average in excess of $1.80. This forecast is especially critical at this time because airlines are increasingly exposed to fluctuating market prices as their fuel hedge positions deteriorate. This includes leading low-cost carriers, all of whom likely would have lost money in 2004 and 2005 had it not been for their hedges. On the other hand, at 2003 fuel prices, nearly every U.S. carrier would have recorded meaningful profits. At today’s consumption rate, every penny increase in the price of a gallon of jet fuel drives an additional $195 million in annual industry operating expenses. In fact, from 2000 to 2005, the industry’s fuel tab doubled, from $16.4 billion to an estimated $33 billion, even though it consumed less thanks to increased fuel efficiency. That’s just staggering, and like any other tax, fee or cost increase, is virtually impossible to pass through to the consumer in this environment of limited pricing power. Airlines have an enormous built-in financial incentive to reduce consumption. Indeed, the industry’s track record shows just that. Fuel efficiency has risen an impressive 18 percent since 2000, and tripled since 1971. Airlines have left no stone unturned in identifying ways to conserve fuel through improved aerodynamics, weight reduction and operational procedures. The use of winglets, which cut fuel consumption three-to-five percent, the removal of ovens or entire galleys to reduce aircraft weight, and procedures like Continuous Descent Approaches are just a few examples. Jet fuel is similar in composition to diesel fuel and home heating oil, and consumers of those other products compete with airlines and other jet fuel users for that portion of refinery output. Also, because the price of jet fuel is principally determined by the underlying price of crude oil, any efforts to conserve energy across the broader economy ultimately provide some relief to the aviation community. We strongly encourage other industries to take similar actions. In short, airlines have not been able to cut costs or raise fares fast enough to keep up with skyrocketing fuel costs. While we recognize that the U.S. government can do relatively little in the short term to reduce jet fuel prices, it should first do no harm. I refer you to recent fuel tax changes, and a pipeline rate case before the Federal Energy Regulatory Commission, detailed in my written comments. Finally, I want to end by emphasizing how ATC modernization could mitigate fuel expenses. The existing ATC system has generally served our nation well. However, it was not designed with fuel conservation in mind, nor was it built to accommodate the anticipated growth in volume and complexity. A modernized system utilizing available technologies and recently developed procedures could save hundreds of millions of gallons per year. In addition to reducing costs to operators, fuel savings achieved through ATC improvements produce significant environmental benefits. For every gallon of fuel not burned, related emissions are not released into the atmosphere. In conclusion, no other industry is more conscious of energy consumption than the airlines. In the best of times conservation and efficiency are a way of life. In the worst of times they are a matter of survival. We are proud of our fuel efficiency gains over the past 30 years and we intend to continue. With the pending aviation reauthorizations, Congress has an opportunity, and an obligation, to leverage advancements in technology and bring about long-needed changes in our national airspace system. This must be a cooperative effort among all participants in our nation’s aviation system, and we look forward to working together to save fuel, save time and save jobs. Thank you. PubZone2	A4A advocates measures to support aviation safety, security and well-being.