Regan Brown
The fuel consumption of airlines is a topic of interest, especially with the recent pandemic causing fluctuations in the industry. American Airlines, a major carrier, is impacted by jet fuel costs, which represent a significant expense. Jet fuel prices vary, influenced by factors like flight length and aircraft type, and can lead to substantial financial outlays for airlines. While specific data on American Airlines' daily fuel usage is unavailable, estimates indicate that US airlines consumed 1.59 billion gallons of jet fuel per month in December 2024, with a notable recovery in jet fuel consumption in the US market compared to other regions.
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What You'll Learn
Jet fuel cost: billions of dollars per year
Jet fuel is one of the biggest expenses for airlines, often costing billions of dollars per year. The cost of jet fuel per flight depends on various factors, including the length of the flight, the number of passengers, and the type of aircraft. For instance, a typical flight on a Boeing 747 from New York to London burns approximately 73,000 kg of fuel, costing around $48,800. With 450 passengers onboard, that's about $108 in fuel costs per person.
The price of jet fuel is influenced by the cost of crude oil and can be mitigated by fuel hedging, where airlines lock in a fixed price for fuel over a set period. During the COVID-19 pandemic, jet fuel consumption by US airlines decreased significantly, with only 13.8 billion gallons consumed in 2021 compared to 18.43 billion gallons in 2007. However, by December 2024, fuel usage had risen to 1.59 billion gallons per month, a 2.7% increase over five years.
According to Statista, global carriers spent a total of $291 billion on jet fuel in 2024, up from $271 billion in 2023 and $215 billion in 2022. The increase in jet fuel expenses can also be seen over a longer period, with airlines spending $190 billion in 2019, $106 billion in 2018, and $80 billion in 2017. This significant rise in jet fuel costs has had a substantial impact on the operational and financial performance of major carriers such as American Airlines.
The recovery in jet fuel consumption has been faster in the US market compared to other regions. In August 2020, US commercial passenger flights consumed approximately 612,000 barrels of jet fuel per day, 43% of the amount consumed on the same date the previous year. This was higher than the relative consumption levels in Europe, Africa, the Middle East, Asia, and the rest of the Americas. The speed and degree of recovery in jet fuel consumption vary across regions, influenced by factors such as the number of flights and the mix of domestic and international routes.
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Fuel consumption: 1.55 billion gallons/month in 2019
The fuel consumption of US airlines reached 1.55 billion gallons per month in December 2019, according to the Department of Transportation's Bureau of Transportation Statistics. This was the final "normal" year before the COVID-19 pandemic, which caused a significant drop in air travel and fuel consumption. In 2020, the global fuel consumption of commercial airlines was 52 billion gallons, a sharp decline from the all-time high of 95 billion gallons in 2019.
Jet fuel is one of the biggest expenses for airlines, often totaling billions of dollars per year. The cost of jet fuel per flight varies depending on factors such as flight length, passenger number, and aircraft type. For example, the Boeing 747 burns approximately 73,000 kg of fuel when flying from New York to London, resulting in fuel costs of $48,800 per flight or $108 per passenger.
The price of jet fuel is influenced by the cost of crude oil and can be mitigated by fuel hedging, where airlines lock in a fixed price for fuel over a given timeframe. In 2019, airlines spent a total of $190 billion on jet fuel, a significant increase from the $80 billion and $106 billion spent in the previous two years. The impact of jet fuel costs on airlines' financial performance is substantial, and carriers are often spending over $100 billion more per year on jet fuel than they did five years ago.
The recovery of jet fuel consumption has varied across regions, with the US showing a faster recovery compared to Europe, Africa, the Middle East, Asia, and the Americas. This is attributed to the speed and degree of commercial jet fuel consumption recovery in different regions. The US saw a decline in jet fuel consumption due to a decrease in the number of flights, with domestic flights being less affected than international flights.
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Fuel usage: up 2.7% in 2024 compared to 2019
Fuel usage by US airlines is projected to increase by 2.7% in 2024 compared to 2019. This rise in fuel consumption is occurring alongside an increase in the cost of jet fuel, which has been steadily climbing since 2022. In 2024, carriers worldwide spent a total of $291 billion on jet fuel, up from $271 billion in 2023 and $215 billion in 2022.
The cost of jet fuel is a significant expense for airlines, often totaling billions of dollars per year. The price of jet fuel is influenced by various factors, including the cost of crude oil, the length of the flight, the number of passengers on board, and the type of aircraft. For example, the Boeing 747 burns approximately 73,000 kg of fuel when operating a typical flight from New York to London, resulting in fuel costs of $48,800 or $108 per passenger.
The impact of the COVID-19 pandemic on fuel consumption by US airlines was significant. In 2019, before the pandemic, US airlines consumed 18.43 billion gallons of fuel. This dropped to 13.8 billion gallons in 2021 due to the pandemic. As of August 16, 2020, consumption of jet fuel by US commercial passenger flights was approximately 612,000 barrels per day, a 43% decrease from the previous year.
The recovery in fuel consumption has been gradual, with US airlines consuming 1.59 billion gallons of fuel per month in December 2024, representing a slight increase from December 2023. This increase in fuel usage and costs can be attributed to the recovery of the aviation industry from the pandemic, with revenue figures and passenger traffic rising.
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Fuel hedging: a way to overcome market price fluctuations
Fuel is one of the most significant expenses for airlines, accounting for 20% to 40% of their operating costs. The unpredictability of fuel prices, influenced by the volatile geopolitical situation, poses a challenge to airlines' profitability. Fuel hedging is a strategy employed by airlines to mitigate this risk and stabilise their costs.
Hedging is a contractual agreement where airlines and fuel vendors mutually benefit by locking in a future price for jet fuel. This mechanism protects airlines from price hikes and provides vendors with stable revenues. For example, in 2022, Air France-KLM paid around $90 a barrel for its fuel through hedging, compared to the market price of $170 a barrel.
Airlines implement hedging strategies by purchasing forward contracts, derivatives, or utilising swap agreements. Forward contracts allow airlines to buy or sell commodities, such as jet fuel, at a specified price on a future date. Derivatives offer a range of financial instruments to manage risk, and swap agreements fix the average monthly floating kerosene price.
While hedging can save airlines billions, it also carries risks. If fuel prices decline, airlines with hedging contracts may pay more than their competitors. Additionally, the optimal hedge ratio, which determines the proportion of commodities to be hedged, should be adjusted based on fluctuations in raw material prices to effectively minimise risk and maximise profits.
In summary, fuel hedging is a critical tool for airlines to navigate unpredictable fuel markets. By employing various hedging strategies, airlines can stabilise their costs, protect their profits, and manage the impact of fluctuating oil prices on their operations.
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Fuel consumption: 612,000 barrels/day in 2020 (down 43% from 2019 due to COVID-19)
The COVID-19 pandemic significantly impacted the aviation industry, with a notable decline in the number of commercial passenger flights and a consequent drop in jet fuel consumption. According to the U.S. Energy Information Administration (EIA), as of August 16, 2020, U.S. commercial passenger flights consumed approximately 612,000 barrels of jet fuel per day, marking a 43% decrease from the previous year's consumption on the same date. This reduction in fuel usage is directly attributed to the decrease in flight volume, with an average of 24,900 daily commercial flights in January 2020 plummeting to 13,700 daily flights by July 2020, representing only 51% of the July 2019 level.
The impact of the pandemic on jet fuel consumption was not limited to the United States but was witnessed globally. In 2019, before the pandemic, commercial airlines worldwide consumed 95 billion gallons of fuel, reaching an all-time high. However, in 2020, fuel consumption plummeted to 52 billion gallons due to the pandemic's disruptions. This decrease in fuel consumption was not uniform across regions, with China experiencing a relatively milder decline, using 60% of its pre-pandemic fuel consumption in August 2020.
The cost of jet fuel represents a significant expense for airlines, often totaling billions of dollars annually. The price of jet fuel is influenced by the cost of crude oil and can vary based on several factors, including flight length, passenger count, and aircraft type. For instance, operating a Boeing 747 flight from New York to London incurs fuel costs of approximately $48,800, translating to $108 in fuel costs per passenger.
While 2020 and the early pandemic years witnessed a dip in fuel consumption, the aviation industry has shown signs of recovery. By December 2024, U.S. airlines' fuel usage had risen to 1.59 billion gallons per month, a slight increase from December 2023 and a 2.7% increase over five years. Similarly, global fuel consumption by commercial airlines is projected to reach 92 billion gallons in 2023 and 99 billion gallons in 2024, approaching pre-pandemic levels.
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