| WASHINGTON, June 16
WASHINGTON, June 16 U.S. airlines, battered by
skyrocketing fuel prices, will on Tuesday call for urgent
congressional action to stem what they believe is excessive
speculative trading in oil markets.
The focus on commodities trading is the industry's
strongest appeal to the government to address global prices,
which have nearly doubled this year and have decimated industry
balance sheets. Carriers are burning through cash reserves to
James May, president and chief executive of the leading
trade group for commercial airlines, the Air Transport
Association, will tell Senate lawmakers at a hearing called to
investigate complaints about speculators that 2008 could be the
worst year ever financially for airlines.
"If Congress does not act soon, this country will not have
a viable airline industry," May said in a statement provided to
Reuters ahead of the hearing.
May plans to outline what his group calls the importance
for "urgent, critical government oversight" of commodities
Airlines and other industries want Congress to change rules
regulating energy commodity futures markets to make trading
"fairer and more transparent," May's group said.
Analysts expect heavy airline losses for the current
quarter and full year on jet fuel prices that have gone from
$90 a barrel at the end of 2007 to $163 -- including refining
costs - on June 13. Merrill Lynch estimates the eight biggest
domestic carriers alone will lose $5.3 billion this year.
These include American Airlines, a unit of AMR Corp
AMR.N, Delta Air Lines Inc (DAL.N), UAL Corp UAUA.O unit
United Airlines, US Airways Group Inc LCC.N, Northwest
Airlines Corp NWA.N and other carriers.
Most carriers are churning through cash reserves to help
pay for fuel, which is their highest expense, and some experts
predict possible bankruptcies next year involving the biggest
airlines if prices do not retreat.
Airline shares rose on Tuesday, with crude prices easing
off Friday's close.
The top U.S. oil market regulator and officials from
leading futures exchanges will also testify at Tuesday's joint
Many U.S. lawmakers - mostly in the Democratic majority -
see excessive speculation as the main culprit for increased
prices. The Bush administration is looking into speculation,
but believes oil price spikes are being driven by the
fundamentals of world supply and demand.
Even if speculation accounts for a fraction of price
increases, airlines would welcome any government relief.
Every $1 increase in the price of a barrel of oil adds $465
million in fuel expenses, industry figures show. U.S. airlines
are on track to pay more than $61 billion for fuel this year,
about $20 billion more than last year.
"How much fluff is in the market because of speculation is
anyone's guess," said Robert Mann, an airline industry
consultant who believes airlines are in a fix partly of their
He notes that airlines, in most cases, failed to adequately
hedge their long-term fuel purchases and have not invested
nearly enough in more-efficient aircraft.
"At the end of the day they'd be talking about paying spot
prices on less than half their consumption instead of, in some
cases, all of it," Mann said.
Mann also said a reliance on smaller planes in recent years
at major airports and over-scheduling have generated less
revenue and worsened congestion and delays, which wastes
enormous amounts of fuel.
(Editing by Braden Reddall)