An Airline Goes Green to Increase Profits

It's no secret that rising fuel costs have crippled airlines. Northwest Airlines, Delta Airlines (NYSE: DAL  ) , and US Airways (NYSE: LCC  ) , have filed for bankruptcy in the past, citing rising fuel costs as the cause. Southwest Airlines (NYSE: LUV  ) was able to maintain low ticket prices in part because of lucrative fuel hedges, but with their expiration, the average ticket price has jumped 39%, causing some to question whether the airline will remain profitable.

With these problems, it should come as no surprise that on June 20, European Aeronautic Defense and Space's Airbus division announced that it has begun research into developing fuel-cell technology as an alternative energy source for on-ground and in-flight electrical power supplies.

Fuel cells and partnerships
Airbus says it will be responsible for the overall aircraft system but is partnering with Parker Hannifin (NYSE: PH  ) , which will supply the multifunctional fuel-cell system and manage various subsystems.

The goal, Airbus and Parker state, is to advance aircraft fuel-cell technology as a key contributor to meeting the ACARE 2020 goals, which require a 50% reduction in CO2 emissions, an 80% reduction in NOx emissions, and noise reduction of 50%. In addition, if Airbus and Parker are able to successfully implement fuel cells as replacements to the auxiliary power unit, mission fuel consumption would be greatly reduced, making Airbus one of the leaders in eco-efficient airplanes.

Airbus can use the good news
Airbus' announcement couldn't come at a better time for EADS. Recently, Airbus announced a two-year delivery delay on two modified versions of its A350 to Qatar Airways. The announcement was followed by Qatar Airways CEO Akbar al-Baker's announcement that his company placed a $1.7 billion deal with Airbus competitor Boeing (NYSE: BA  ) .

As if the two-year delay wasn't bad enough for Airbus, at the international Paris Air Show in Le Bourget, France, Airbus had to ground its star superjumbo A380 after the plane's wing collided with a building at the Le Bourget airport. Making matters even worse was the grounding of the A400M military transport plane because of gearbox problems.

Flying high in the future?
Although the two-year delay and problems at the Air Show are not what investors want to hear, Airbus does still have a number of things working in its favor. Since 2009, Airbus has increased its revenue by 7%, boosted its order intake by 185%, and increased its delivery by 2%. Moreover, if Airbus and Parker are able to develop an effective replacement for APUs in the form of fuel cells, Airbus will have a huge competitive advantage.

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Fool contributor Katie Spence wants airline ticket prices to drop so she can go to Greece. She owns no shares of any company mentioned above. Motley Fool newsletter services have recommended buying shares of Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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