DESPERATE MEASURES

Continental Airlines recently loaded an extra 10,000 lb. of jet fuel on a flight from Houston to Cancun, Mexico. With prices running 17 cents a gallon cheaper in Texas, Continental managers calculated it would be less expensive to haul the fuel to Mexico for the return flight.

They were right. Even accounting for the cost of transporting the additional fuel, the airline still generated a savings: a whopping $112.

No savings is too small these days in the global airline industry, where an unforeseen spike in crude oil prices has added billions of dollars to fuel tabs and forced carriers to turn to innovative--and sometimes desperate--measures to cut consumption, drop by drop.

British Airways now sells inflight duty-free alcohol in plastic bottles instead of glass to cut down on weight. Alaska Airlines counts the number of children on each flight and then reduces the amount of fuel it loads accordingly. And American Airlines closely monitors its ground crews to make sure they pump exactly the fuel ordered--and not a gallon more.

Across the board, airlines are adopting a wide range of fuel-saving measures, such as adding winglets to reduce drag, taxiing on a single engine, mapping more direct routes and curtailing the use of fuel-hogging auxiliary power units (APUs) while parked at the gate. While some of these practices have been in use for years on an ad-hoc basis, they are being implemented now with a new urgency across the industry as airlines cope with high fuel costs and cutthroat competition. For successful carriers, it's a matter of improving the bottom line to remain profitable. For struggling airlines, it's a matter of life or death.

"Sometimes you need to go back to the basics," says David Castelveter, spokesman for US Airways, which is operating under bankruptcy protection. "You forget the obvious. Every dollar of savings to this company is important."

Indeed, the dollars add up in an industry that consumes more than 50 billion gallons of fuel worldwide each year. Continental's $112-per-flight savings on its Houston-Cancun route is part of an initiative aimed at saving $8 million a year by purchasing extra fuel at lower cost airports. American expects to conserve $15 million a year from a similar initiative. And Delta Air Lines says a new flight planning system designed to calculate the most efficient routes and altitudes will yield at least $5 million a year in savings.

BUT WITH FUEL the airline industry's second biggest expense after labor, such initiatives only begin to chip away at the devastating impact of surging crude oil prices. Jet fuel prices are up about 50% since the start of the year and have doubled in the last three years. American and United Airlines say they will spend $1 billion more on fuel this year than they had projected in January.

Airline executives are desperately hoping that crude oil prices, which peaked at $55 a barrel in November, will settle down in 2005. "Is there any airline with a business model that will work if the current situation with high fuel prices and industry overcapacity continues?" asks America West CEO Douglas Parker.