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Originally published Thursday, August 11, 2005 at 12:00 AM

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More fuel for airlines' woes

Lost luggage, bad weather and now ... no fuel? While fliers haven't yet had to add that problem to the headaches associated with air travel...

The Associated Press

WASHINGTON — Lost luggage, bad weather and now ... no fuel?

While fliers haven't yet had to add that problem to the headaches associated with air travel, it may not be far away.

Airports in Arizona, California, Florida and Nevada recently came within a few days — and at times within hours — of running out of jet fuel.

Because of supply bottlenecks, airlines were forced to fly in fuel from other markets and scramble for deliveries by truck. But these are expensive, short-term fixes that do not address what airline executives consider the underlying problem:

With passenger traffic rising above pre-9/11 levels, the nation's aviation business is slowly outgrowing the infrastructure that fuels it.

What started as routine supply tightness in these markets quickly snowballed after events that included a hurricane, a canceled fuel shipment and, ironically, the airlines' own efforts to prevent shortages, according to several executives.

Late July and early August were "unprecedented for Southwest for the number of cities where we've had to manage supply problems," said Glenn Hipp, director of fuel purchasing and inventory management at Southwest Airlines.

American Airlines, United Airlines and America West also acknowledged recent supply trouble.

These airlines have not canceled flights or made extra stops to tank up, nor have planes flown with less than the minimum fuel required by the Federal Aviation Administration, executives said.

But the near shortages underscore the added strain on refineries, pipelines and the airlines' own fuel-procurement efforts as the industry recovers from its worst-ever downturn and the economy's energy demands rise.

"It's really starting to surface as an issue," said James Holland, vice president of logistics at Kinder Morgan Energy Partners, a Houston-based pipeline operator.

Part of the problem is that refining and pipeline capacity in some regions have grown more slowly than demand, meaning companies must run their equipment harder to satisfy growing fuel needs.


This raises the chances of operational snags and leaves less of a cushion when something does go wrong. Recent refinery outages have helped push oil prices to record heights near $64 a barrel.

Also, the petroleum industry has cut its fuel inventories in recent decades, redirecting funds once spent on storage to more lucrative oil drilling.

Thus, some of the burden of storing surplus fuel has shifted to the airlines. But the industry's financial woes have hindered its ability or willingness to increase spending on storage, according to John Armbrust, publisher of newsletter Jet Fuel Report.

"If more effort isn't put into resolving some of these issues, it could have serious impact on the operational integrity of the whole aviation system," warned Bob Sturtz, general manager of fuel at United Airlines.

While progress is being made, airline and energy executives predicted the problem could get worse before it gets better.

The fuel-supply woes are dogging an industry already losing billions of dollars a year, in large part because of soaring fuel costs. The price of jet fuel averages $1.91 per gallon in Los Angeles, up 46 percent from a year ago, according to government data.

Airlines have used all sorts of strategies to improve fuel efficiency, from flying at slower speeds to taxiing on one engine. These efforts have worked, but they have been offset by their maneuvering around supply bottlenecks.

America West's assistant treasurer, Timothy Walker, said the industry deserves credit for its ability to manage these problems without affecting service.

"The lack of fuel could slow growth in certain markets," Walker said. He cited Phoenix and Las Vegas as two America West markets likely to face fuel-supply challenges if traffic continues to grow.

Indeed, one of the latest supply snags began around July 20 in Phoenix. While accounts vary slightly, it is agreed the trouble began after Kinder Morgan did not make a scheduled delivery of fuel, at which point carriers began "ferrying" extra fuel from California and Nevada.

At first, it seemed a crisis was averted. Then it cascaded.

The near-shortage in Phoenix spread to airports in Reno, Nev.; San Diego and Ontario, Calif. Jet fuel had to be trucked in just to keep the ferrying program to Phoenix alive, executives said.

Delivering jet fuel by truck is like "putting a handful of sand on a beach," Hipp said. "It doesn't really keep up with demand."

Seattle-Tacoma International Airport stores about 24 million gallons of jet fuel in tanks, about eight days supply, said Joe Quinn, a spokesman for Sea-Tac Fuel Facilities, an airline consortium.

Airport spokesman Bob Parker said the tank capacity was not expanded as part of the current $4.2 billion makeover of the airport.

The tanks are connected to a spur of the Olympic Pipe Line, and are topped up every few days, when they're about half full, Parker said.

If a disruption occurred when a delivery was due, then the airport could face a shortage. "Because it's a sole source, if there's a problem with the pipeline, that starts to be an issue for us," he said.

The port plans to connect fuel lines to each of the airport's 91 gates, so tanker trucks won't need to drive fuel to waiting jets.

When the Bellingham explosion occurred in 1999, cutting off Olympic Pipe Line's capacity, Sea-Tac was due for a delivery. As a result, the airport came within a few hours of running out of fuel, Parker said. But the line was restored before the airport ran out.

Information on Sea-Tac provided by Seattle Times business reporter Al Scott.

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