Prepare Now For Fuel/Emissions Costs To Increase (Part 2: Optimize Operations in 2016)

Editor’s Note: In our November 24 post, we noted three simple places to look inside your operation to help optimize 2016 opportunities. Now, we’d like to show you two places to look outside your operation that, right now, don’t necessarily look ominous. And they won’t be, if you prepare for them now, while you have the time and budget to do so.

When it comes to fuel prices and emissions assessments, the word unpredictable (if not volatile) could be used to describe the recent past. However, while the status of these two critical aviation expense items is relatively stable, you have a rare opportunity now to perhaps predict, if not prepare for, the future.

Fuel Mantra: “Lower Prices Longer”

The low fuel costs of 2015 provided much needed relief for BA operating budgets. In fact, as a percentage of overall costs, fuel dropped, on average, from 35% to 25% of most budgets in 2015. Right now, all indications are the same will hold true for 2016. However, we suggest you pay heed to that little voice in your head. You know, the one that whispers, “Fuel prices are going up again.”

An IATA/Platts Current Price Analysis from December 4, 2015 shows that jet fuel prices are down 35.8% from one year ago. And, the news only gets better when you consider a Wall Street Journal story entitled: Oil Price Forecast to Stay Below $60 Through Next Year (updated September 23, 2015), where 13 different investment banks lowered the average price per barrel of various crude oils, and 10 of those banks stated they didn’t expect those prices to fluxuate much in 2016. Even a BMI study from May of 2015 (Jet Fuel: Positive Demand Trend to Boost Prices) forecasts that to 2019, jet fuel prices will rise “progressively” from roughly $60 per barrel to approximately $70.

As the old saying goes, It wasn’t raining when Noah built the arkc. Religious inferences aside, now is the time to prepare your operation for the next fuel price explosion. Why? Because the same sources noted above indicate that any number of factors could trigger a fuel price uptick.

For starters, as fuel prices go down, demand for air travel will increase. You’re likely seeing that in your operation today. In addition, many sources are indicating that the global economic strength is growing, which will drive more commerce and the need for more air travel. Emerging economies like China and India are again expanding at higher-than-average rates. The extraordinary growth of these economies will further boost the need for air travel faster than standard economic forecasts allow.

And, if you’ve spent any time in a cockpit you know better than most, the more variables that influence a forecast, the less likely it is to reflect a real world environment.

2016 Means a Boost in Emissions Regulations

2016 is going to be a seminal year when it comes to decisions regarding the need to measure, forecast, report and “neutralize” (pay for) emissions. At the creation of this post, the Paris Climate Change Conference (November 2015) is wrapping up. Details are few on the COP21 agreement (though it appears that aviation was spared any direction mention), but it’s a safe bet that all of aviation will be impacted in some way.

In a statement released by ICAO (International Civil Aviation Authority) in hailing the COP21 agreement, ICAO seems to view COP21 as an endorsement to go full throttle on its efforts to make aviation carbon neutral by 2020, “The fact that international aviation was not covered under the COP21 agreement was considered by Aliu (Dr. Olumuyiwa Benard Aliu, President of the Council, ICAO) to be ‘a vote of confidence in the progress ICAO and the aviation community have achieved thus far, and in our ambitious aspirational goals for the coming decades. Most importantly, it provides our community with further momentum toward achieving agreement on an international aviation market-based Measure (MBM) at ICAO’s 39th Assembly later next year (September 2016).’”

Waiting May Cost You

Yes, fuel prices are low and are forecast to stay that way. And, yes, the implementation of new and more strict emissions standards are likely a year or more away. In Part 1 of our series to help you optimize 2016, we suggested that updating (or acquiring) one new piece of software and learning how to use it will help you get more from 2016.  Fuel management and emissions tracking and reporting software are available in the market today. Why not use the break in fuel prices now to pay for software that will help you benchmark, forecast and manage fuel costs BEFORE they go up again? And/or, why not tag a few dollars in your operating budget this year for “emissions” and get some digital help to, again, benchmark, forecast and manage potential emissions taxes/fees/expenses in the coming years? Being proactive now takes the sting out of having to react later. So, why wait?

Jeppesen offers tools that can help manage fuel expenses and emissions reporting. Learn more by clicking here or contacting your trusted Customer Service representative directly. Or, you can email customerservice@jeppesen.com or call (800) 353-2108.

 


Posted on