The ailing US airline industry, still trying pull out of the slump following the Sept. 11 attacks, faces more turbulence as surging oil prices threaten to prevent a return to profitability.
The industry's main trade group pleaded on Wednesday for President George W. Bush's administration to stop diverting oil from the market to an emergency reserve at a time of sky-high prices.
"Despite some encouraging estimates that traffic levels are likely to return to pre-9/11 levels this summer, sustained high fuel prices have all but wiped out any chance of profitable year for the industry as a whole," said Air Transport Association president and chief executive James May.
The association said every US$1 increase in the price of oil represented US$425 million in additional expenses for the airline industry.
Energy analysts were projecting an average oil price for the year of US$37 a barrel, up six from 2003 and representing about US$2.5 billion in extra expenses, May said.
That increase was equal to expected losses for the entire airline industry this year, he said.
May said the ATA was seeking a "go-slow" middle ground by not advocating the release of oil from and instead calling for a suspension of additions to the Strategic Petroleum Reserve (STR).
Under ATA's proposal, the government would not fill the SPR when oil prices exceeded US$30 per barrel. The industry said experts believe the move could lower oil prices about US$2 to US$6 per barrel.
Minutes before the airlines issued their demand, Bush said after a Cabinet meeting that he opposes drawing down the reserve.
High fuel costs have rocked the airlines, already struggling with sluggish demand, high costs and competition from budget carriers.
On Tuesday, Continental Airlines announced an immediate worldwide fare increase and said it was considering further job cuts to help offset record fuel prices.
Fares went up by US$20 each way for flights over more than 1,600km and by US$10 each way for shorter flights, the carrier said.
Standard and Poor's revised its outlook on Continental to "negative" saying it could cut the carrier's credit rating if conditions do not improve.
S&P analyst Philip Baggaley said, "Continental is attempting to raise fares, but if other airlines do not follow suit, then Continental may need to seek concessions from its employees, a step that it has thus far tried to avoid."
Delta Airlines, which announced a management shakeup on Wednesday as part of its drive to return to profitability, has warned it may file for bankruptcy unless it can cut costs, turn a profit and borrow money on the financial markets.
Other airlines are sputtering too.
Transportation Department figures show the industry as a whole lost US$626 million in the fourth quarter of last year, even though some regional and low-cost carriers turned a profit.
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