Oneworld to explore options to ease fuel price pressure

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Oneworld alliance members are to explore whether they can jointly ease their fuel expenditure, as the soaring cost of oil threatens to undermine the group’s relatively strong financial position.

While joint fuel purchase has not been a particularly extensive activity within Oneworld, the alliance’s procurement group is to meet next week to discuss the carriers’ options.

Speaking at a briefing during the IATA annual general meeting in Istanbul, Oneworld managing partner John McCulloch said the alliance felt it needed to “be a bit more aggressive” in dealing with the matter.

“We will be looking at this and trying to solve the two issues which have held us back,” he says. Joint fuel purchase has remained a sideline activity, he says, because carriers have been able to achieve benefits more effectively on their own, and because the alliance has had to avoid breaching anti-competition regulations.

“It’s ironic that the people selling the [oil] blatantly collude,” says McCulloch, directing the accusation at the oil-producing member states.

The inter-governmental Organization of the Petroleum Exporting Countries (OPEC) last month said there was “clearly no shortage of oil” in the market.

It attributes the volatility of prices to increased flow of speculative funds, as investors seek better returns following depreciation of the US dollar and problems in the equity markets.

McCulloch describes the high fuel prices as “unsustainable”, adding: “There are very few carriers making money.”

Last year Oneworld’s joint revenues reached $725 million, a 10% rise on the figure for 2006, following the alliance’s expansion to 10 full members. Oneworld claims to have the best collective operating margin, at 6.4%, of the three major global alliances.

Joint procurement activities have saved members collectively around $300 million over the past eight years, says McCulloch, although this is only the figure which the alliance has been able to track. Most of these savings have been achieved through engineering and maintenance initiatives, such as standardisation of parts.

McCulloch says the alliance is unsure of the extent to which it can generate pressure to cut its carriers’ fuel bill.

But he says: “In a business where operating margins are thin at best – let alone at a time of soaraway fuel prices – revenues and cost savings from Oneworld make an increasingly important input to our member airlines’ financial standings, and we are committed to increasing the contribution the alliance makes.”


Source: flightglobal.com's sister premium news site Air Transport Intelligence news