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Fuel, fuel, fuel

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There is one topic, above all others, currently on the minds of everyone in the commercial aviation business—from passenger airlines to cargo carriers to OEMs. Fuel. Or, more specifically, the price of aircraft fuel.

Airlines for America (A4A) chief economist John Heimlich said this week that average US jet fuel prices are up 7% year to date in 2012, “which is important to note because 2011 was a record high year for spot jet fuel prices.” Singapore Airlines sunk to a rare quarterly deficit in the March period. “High fuel prices … weighed heavily,” it said.

Panama's Copa Holdings managed to slightly increase profitability in the March quarter, but no thanks to fuel. Its quarterly fuel expense heightened 47.1% to $170.8 million, which nearly triples its next highest cost category (personnel, which cost the company $57.5 million in the year's first three months). Copa's CASM rose 9.9% in the first quarter, more than double the 4.2% rate of growth of its CASM ex-fuel.

But, as Pratt & Whitney president David Hess pointed out to me in a conversation last week, the rise in fuel prices does not hit all segments of the commercial air transport business the same way.

“The price of jet fuel right now is proving to be a two-edged sword,” he said. “On the one hand, it's challenging the airlines in terms of preserving their profitability. On the other hand, it's stimulating a recapitalization of their fleets so they can replace older aircraft with newer, more fuel-efficient, re-engined aircraft. We're seeing a very robust order stream. The only thing that seems to be limiting the airframers is the ability to ramp up the supply chain.”

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