Airline execs worry over oil spike, see mergers

Wed Nov 7, 2007 3:40pm EST
 
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By Kyle Peterson

CHICAGO (Reuters) - Prospects of $100-a-barrel oil sent shares of U.S. airlines tumbling on Wednesday, renewing talk in the industry of mergers and ticket price hikes as a way to hold onto profit margins.

The oil spike comes as a softening economy begins to threaten an industry only just recovering from years of cutthroat competition and a series of bankruptcies.

"I'm not certain that where we are today is a business that can handle $100-a-barrel oil," US Airways Group Chief Executive Doug Parker said at a Wall Street investor conference on Wednesday.

"We've been through a painful restructuring since 2001, but we're still not fixed," said Parker, whose remarks were broadcast on the Web.

The chief financial officer of AMR Corp's American Airlines stressed that higher ticket prices were necessary to compensate for soaring oil.

"We've got to find a way to pass on fuel expenses to our customers," CFO Tom Horton said at the same conference. "We're going to need to keep driving costs down in order to compensate for the fuel-revenue disconnect."

The price of NYMEX crude oil futures -- directly related to the price of jet fuel -- notched a record high above $98.50 on Wednesday.

The Amex airline index fell 3 percent to its lowest level since August 16. Shares of Delta Air Lines were hit hardest, falling 6.1 percent to $17.38.  Continued...

 

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