If you think filling up your vehicle is bad in the days of skyrocketing oil prices, try refuelling a jumbo jet.
"It's not just the high cost of oil and how fast oil prices are rising, but also the cost to get it to a refined jet fuel," says WestJet vice-president of culture and communications Richard Bartrem.
Faced with fuel increases in the hundreds of millions of dollars, the Calgary-based carrier is doing everything it can to stay in the air.
From using GPS technology to fly the most direct routes into airports to reducing onboard weight and even flying slower, WestJet is cutting fuel consumption everywhere - and anywhere - it can.
"We have our onboard computers look at the cost index of fuel and what is the most efficient speed to fly the plane," Bartrem explains. "The overall effect on the guest is minimal, but when you look at the 380 flights we have a day, the impact (on our bottom line) can be quite significant."
While some of these fuel-saving initiatives have been part of WestJet's low-cost business model, other ideas, like carrying less water onboard, are direct responses to today's soaring fuel prices.
"It just becomes a question of do you need to fill the tanks of an aircraft that can fly seven hours with full tanks if it's only going from Calgary to Edmonton?" Bartrem asks. "So we're looking at how much freshwater we need onboard and only carrying what we need to reduce weight."
With North America's youngest fleet, WestJet had already taken off ahead of the competition when it came to cutting fuel costs. But in light of record-setting oil prices, the company's $2-billion-plus investment in more fuel-efficient planes is now paying even bigger dividends.
"The technological advancement in the planes themselves and the engines has resulted in a 30-per-cent increase in fuel efficiency," says Bartrem. "The average age of planes in the U.S. is more than 15 years old and that's why we're now seeing a large number of U.S. airlines park aircraft because the cost associated with fuelling and flying their aircraft is just too great."
Consumer groups are now calling the situation in the U.S. airline industry "a full-blown crisis.”
Ten thousand job cuts have been announced since May and there are dire predictions for the future.
In Canada, newer planes are helping to mitigate the high fuel costs - Air Canada, like WestJet, has invested billions of dollars in a new fleet - but it hasn't been enough to keep Canada's largest carrier on course.
With each $1 increase in the price of a barrel of oil adding an estimated $26 million to Air Canada's annual fuel tab, the airline says it has no choice but to reduce capacity by seven per cent and cut up to 2,000 jobs after the busy summer season.
"Air Canada, like most global airlines, needs to adapt its business and reduce flying that has become unprofitable in the current fuel environment," president and chief executive officer Montie Brewer said.
Fuel is the carrier's single largest expense, accounting for more than 30 per cent of Air Canada's operating budget.
The rapid rise in fuel prices - at last week's price of $140 per barrel it is more than double what it was just a year ago and quadruple the 2004 price - will cost the airline close to a billion dollars more this year than it did in 2007.
"If fuel prices remain at current levels, we can anticipate further capacity reductions," Brewer predicted.
To keep the airline profitable, fuel-saving measures, such as taxiing on one engine, have been introduced and flying has been altered to reduce fuel burn. Ultra-lightweight Kevlar cargo containers, more than 20 kg lighter than conventional cargo containers, are also now being used. It's estimated that move alone will save the airline 2.8 million kilograms of fuel a year.
Meanwhile, Jazz Air (TSX:JAZ.UN) is cutting 270 employees as it reduces capacity by five per cent.
"The decrease in Air Canada's need for Jazz's services necessitates a reduction in staff of approximately 270 Jazz employees," the regional operator stated.
Jazz CEO Joseph Randell added that "every effort is being made to mitigate these job losses, and we hope this downturn in our industry's cycle ends soon. We are in a period of great uncertainty and cannot predict where the price of fuel is going."
With no end in sight to surging oil prices, all sectors of the transportation industry are starting to follow aviation's lead.
Take the popular Chi-Cheemaun ferry near Owen Sound, Ont., which will now operate on two engines instead of four.
"It is possible to reduce fuel costs simply by slowing the ship down, even if that means operating a little behind schedule on busy days," says Owen Sound Transportation Co. general manager Susan Schrempf.
Reluctant to impose a fuel surcharge, Schrempf says the ferry, which runs between Tobermory and Manitoulin Island, should save more than 6,000 litres of fuel each day during the peak summer season.
"The rises in fuel prices at the gas pump have already had a negative impact on our ridership and we do not wish to compound that by introducing a fuel surcharge on ferry prices," Schrempf adds.
For the taxi industry, higher fares and fuel surcharges are becoming the norm. Escalating fuel prices have already prompted price hikes in many areas, including Toronto, Calgary and British Columbia.
"Everybody, every member of society, is feeling the pinch and the taxis are out there driving 24/7 so it goes without saying that we're really getting hurt by the high gas prices," says Mohan Kang, president of the B.C. Taxi Association, which requested the province's new 3.5-per-cent fuel surcharge.
A taxi driver for more than 25 years, Kang estimates that the high fuel prices are costing cabbies up to $70 more per shift, depending on the type of car they're driving.
"It's our business, it's our living, and the added cost means less income for the driver," Kang says. "We never could imagine that the price of fuel could go this high and hurt the taxi industry so much."
To avoid repeated price hikes as fuel prices rise, politicians in Toronto are trying to drive home a more permanent change with smaller, more fuel-efficient taxis. Of about 5,000 cabs in the megacity, most are gas-guzzling six- or eight-cylinder vehicles.
For cabbies who can afford them, hybrids - which can cost a few thousand dollars more than comparable non-hybrid vehicles - are also becoming an increasingly popular option. Winnipeg's Duffy's Taxi, one of Canada's first fleets to convert to the fuel-efficient and environmentally friendly vehicles, now has more than 90 Toyota Prius hybrids on the meter.
Bus companies are making the hybrid investment, spending money now on more fuel-efficient buses to save down the road when fuel costs are expected to be even higher.
It's good news for Winnipeg-based New Flyer Industries, which has received orders for up to 1,234 buses in the last three months. The new orders, for hybrid buses as well as clean diesel, electric trolley and natural gas propulsion systems, will boost the company's income by US$706 million.
Faced with an $8-million overspend of its fuel budget this year, the City of Edmonton is also looking at ways to reduce fuel costs. Forty-seven new hybrid buses have been ordered as part of the plan to keep the city's transit system on track.
"The large increases on fuel this year have been a big wakeup call for everyone so it's really important for us to get a handle on being much more efficient - or at least as efficient as we can be," says Steve Rapanos, Edmonton's manager of mobile equipment services.
With more than 5,000 vehicles on the road from buses to firetrucks, police cars and pool cars, the City of Edmonton used 27 million litres of fuel last year. To reduce consumption, Alberta's capital has instituted an anti-idling policy and has even been training staff to use less fuel.
The fuel-sense program, which has been running for a few years now, has seen a fuel reduction of up to 15 per cent. It teaches staff - and the public when space permits - to drive in the most fuel-efficient way possible.
"With the high fuel prices, this is really becoming a focus and we're starting to be much more aggressive on reducing consumption," Rapanos says.
- with files from The Canadian Press (Tess van Straaten can be reached at tess@businessedge.ca)
