Coping Up of Local Commercial Airlines in Fuel Cost: A Study Chapter I Introduction Fuel cost and the demand in air

travel are linked together. On partitions, fuel gets the fifteen percent (15%) of the airlines costs. Other costs are less volatile than fuel prices, so stabilizing the budget for fuel stabilizes overall airline costs. A stabilized airline costs means a more stable airline profit. The fuel price uncertainty due to fuel and energy price fluctuations is another major challenge for the airliners. Relative too this challenge is the growing awareness of the environmental externalities related to transportation activities. State, federal, and international initiatives are encouraging aviation to reduce GHG emissions through a variety of policy initiatives. Many of these involve market mechanisms that would effectively increase the price of fuel. At an international level, for example, ICAO is investigating an open emission trading system for aviation and the European Commission has announced a legislative proposal for the inclusion of aviation in the European Union Emissions Trading Scheme (Wit et al., 2004; Scheelhaase and Grimme, 2007). The evolution and impacts of GHG reduction policy thus add further uncertainty about the future price of fuel. The market price for aviation fuel increased rapidly. To offset growing oil prices, airlines and manufacturers strive to continually improve their product through innovative technology and procedures. Such actions resulted in modest efficiency growth

compared with the peaks of fuel fluctuations seen (ATA, 2008). Many major airlines around the globe announced capacity cuts, introducing the possibility that the current arrangement of interregional air transportation is not efficient in consideration of increasing fuel costs (Schlangenstein, 2008; BTS, 2003).

In light of the wide range of future fuel price scenarios, it is important to understand how the airlines cope up with the challenge and how this would affect the air transport industry. For example, airliners around the globe adopt fuel hedging, narrow-body

aircrafts with turbofan engines, and other strategies that cut their operating costs.

The objective of this study therefore is to study the different strategies of the local airlines of the country on the challenge in fuel prices and the further uncertainties in the future market conditions as well as environmental policy compliance.

This study compares the operating costs and the effect on consumers of the airlines. Operating costs include fuel, crew, maintenance, and airport costs. Consumers drawbacks or advantages concern the ticket costs, terminal fees, travel time costs, and services. By combining passenger and operating costs in a single function, this study takes a total logistic cost approach. This allows the different strategies and service attributes to be compared.

Background of the study Several sources have documented the diminishing discovery of new petroleum sources and the discovery of new petroleum sources and the ever increasing global demand, Fig. 1.

Figure 1. The rate of oil discovery is falling while the rate of oil consumption is increasing.

Some sources claimed they have already reached a point where half of the worlds crude oil has been consumed, while others indicate mid-century, Fig. 2. In any regard, mitigation options must be implemented many years, perhaps decades, in advance of the actual peak oil event to assure a smooth transition to alternate fuels.

Figure 2. Alternate fuel sources will need to be developed to offset the anticipated peak production of conventional oil supply.

Current aircraft have experienced dramatic improvements in fuel efficiency since the introduction of commercial jet aircraft in the 1960s. Next-generation aircraft will see another 15-20 percent improvement in fuel efficiency, making air travel one of the most efficient means of transportation. However, air travel growth is predicted to continue at five percent per year and the future rate of gains in fuel efficiency will thus be outpaced by the projected growth in air traffic. So the aircraft industry will still require an increasing amount of fuel.

As a consequence, the aviation industry is interested in coping up with the challenge of the possible shortage of oil. The key issues center on fining strategies that will

compensate to the fuel cost or finding a sustainable source of fuel that will keep the fuel costs at a reasonable level. In addition, potential alternate fuels should exhibit environmental benefits, by providing airline operators with potential CO2 credits.

Conceptual Framework state

Conclusion
Gathering of Data

Analysis of Data

Methodology

Stament the Problem

Statement of the Problem The study is conducted to determine the different strategies and management of local commercial airlines concerning the fluctuating fuel costs and future fuel price uncertainty. Furthermore, this study is to recognize the most effective coping mechanisms used by the airliners and how they comply with the environmental policies.

The researchers also aim to conclude the effects of fuel prices to the air transport costumers which are the primary medium of the impact. This study aims to answer the following specific problems: 1. What are the effects of fuel cost in the local commercial airlines? a. Operations b. Marketing c. Profit 2. What are the strategies of the local airlines in coping up with the fuel costs? a. Fleet Management b. Operation c. Costumer Service d. Fuel e. Future technological innovations 3. What are the effects of the adopted strategies on the costumer of local airlines? a. Costumer Services b. Ticket Prices Significance of the Study Scope and Delimitation Definition of Terms