High oil prices test low-care air carriers

CNY Business Journal (1996+), Oct 29, 2004 by Spohr, George

SYRACUSE - When your company's slogan is "Low fares every day," it doesn't help when your biggest expense spirals upward every day.

The company, budget airline Independence Air, which this year began flying from Syracuse Hancock International Airport, has had to increase fares to compensate for the rising cost of oil, as has its chief rival Upstate, JetBlue. At the opening of trading Wednesday, Oct. 27, oil cost a record $55 per barrel.

"The key to the low-fare business model is maximizing utilization of all of your assets, which are the aircraft, of course, plus our physical plant, like our gate space at airports, the equipment we use, and certainly our staff," says Rick DeLisi, Independence Air's director of corporate communications. "The key to the model is flying the aircraft more per day and having a more efficient schedule.

"There's no question these fuel prices being at record-high levels definitely change the economies of scale of the whole program," DeLisi continues.

JetBlue declined to comment.

Fares are up at Hancock for both budget airlines such as Independence Air and JetBlue and the major national carriers as they are across the nation, says Thomas Parsons, who runs the bestfares.com Web site. Most tickets cost $10 more each way, he says.

DeLisi is quick to point out that budget airlines still provide lower airfare than traditional carriers. "Everyone in the industry is facing the same issues when it comes to high fuel costs," he says. "This doesn't change our competitive advantage. This is not happening in a disproportionate way to the competitors."

While Independence Air was founded in 2003, its company traces its roots back to 1989, when it flew under the name Atlantic Coast Airlines as a partner to United Airlines and Delta Air Lines. Not in any of that time have oil prices been such a factor in the business model, DeLisi says.

"These are the highest fuel prices in the history of the planet," he says, adding that airfares are lower today than they were two decades ago when - inflation taken into account - oil prices were higher than they are today.

DeLisi declined to say how much more high oil prices are costing the airline, but said measures are in effect to minimize the expenses' damage to the bottom line.

There are ways to conserve fuel when flying airplanes, he says, "much like the way you drive your car has an impact on what kind of mileage you get. There are some things the crews can do when fuel economy is an issue that certainly don't impact the schedule or safety in any way."

He declined to comment on the airline's fuel-conservation measures, but adds, "fuel economy is on the minds of every crew member of every airline company at all times."