Airlines: Curb oil speculation
In open letter, 12 U.S. airlines call on Congress to curb excessive speculation that they say drives up oil and fuel prices, slamming the airline industry.
NEW YORK (CNNMoney.com) -- Hundreds of grounded planes. Thousands of lost jobs. Nearly two dozen price hikes. Record oil prices have battered the airline industry, and Wednesday the airlines called on Congress to act.
In an open letter to all airline customers, CEOs from 12 of the nation's airlines said lawmakers must curb excessive speculation to scale back record fuel costs.
"Normal market forces are being dangerously amplified by poorly regulated market speculation," the letter said. "The nation needs to pull together to reform the oil markets and solve this growing problem."
The airline industry said that Congress' previously established regulations to control excessive market speculation have largely been weakened or removed in the past two decades.
"We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight," the letter said. "Together, these reforms will help cool the overheated oil market and permit the economy to prosper."
A dozen or so bills have been introduced in the House and Senate on the subject of oil speculators. Democratic leaders in the House have promised to address the issue by tackling "excessive" speculation, but so far they have little to show for it. Policy analysts believe a bill is coming, but it may be September before a law can get passed through both chambers.
Meanwhile, airlines say record fuel prices are burdening their business and customers alike. Analysts expect the airlines will cut capacity by 9% in 2008 while continuing to hike fees and cut staff.
"For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities," the letter said.
American Airlines hopes its customers will help to urge Congress to sign a meaningful bill on speculation in futures markets.
"We are urging our customers and employees to ask Congress to act quickly to curb speculation in the commodities markets," said American Airlines in a statement. "Some experts estimate that this speculation adds $20 to $60 to the price of a barrel of oil - and it is consumers and companies like American Airlines, who actually use the oil for a productive purpose, who pick up the tab."
Even Southwest Airlines signed the letter. Though most airlines weren't as lucky, Southwest hedged 70% of its fuel costs at $51 a barrel. As a result of its smart bets in futures markets, the discount airline is paying only about $2 a gallon for its jet fuel.
"We mainly signed the letter as a show of support to the industry and to raise awareness for our customers," said a Southwest spokesman. "But even with the hedge, we're 30% vulnerable to current market prices."
The CEOs of AirTran Airways Inc. (AAI), American Airlines' parent company AMR (AMR, Fortune 500), Delta Air Lines Inc. (DAL, Fortune 500), JetBlue Airways Corp. (JBLU), Northwest Airlines Inc. (NWA, Fortune 500), United Airlines Inc. (UAUA, Fortune 500), Alaska Airlines Inc., Continental Airlines Inc. (CAL, Fortune 500), Hawaiian Airlines Inc., Midwest Airlines, Southwest Airlines Co. (LUV, Fortune 500) and US Airways Group Inc. (LCC, Fortune 500) all signed the letter.