Airlines consider fuel "buying group"

Friday, 07 Jun, 2006 0

Global airlines should consider collective fuel buying to save money, Malaysia Airlines Chief Executive Idris Jala said on Tuesday, and called on trade body IATA to study the idea.

“I suggest IATA put together a little group, a fuel-buying house,” Jala, formerly an executive with oil giant Royal Dutch Shell, said during a panel discussion at IATA’s annual meeting in Paris. “My previous employer would probably not like this idea”.

“If you pool together, you get volume discounts,” he said on the sidelines of the event. “If three airlines get together, it could work, imagine 10 airlines getting together.”

Lufthansa CEO Wolfgang Mayrhuber supported the suggestion: “I think it’s worthwhile to look into the idea.”

Jala said it was time for carriers to roll up their sleeves and study whether it might work.

“My suggestion is that IATA do a study on it,” he said. “What are the mechanics, how do you get participants into it… take a look at the various jurisdictions, (and the issues of) competition and anti-trust.”

Airline bosses struggling to contain operating costs blame part of their woes on jet fuel prices, which have risen even faster than crude oil because of high demand and bottlenecks in refining, a problem exacerbated by last year’s Hurricane Katrina which damaged US refineries.

Jala, who is spearheading deep cost-cutting measures at Malaysian including slashing staff and domestic routes, noted the airline would have turned in record profits in 2005 if jet fuel had stayed at 2004 levels, but instead posted a record loss.

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Graham Muldoon

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