- The Washington Times - Saturday, July 12, 2008

U.S. airlines, reeling from record fuel prices, urged Congress to curb speculative trades because the industry “cannot continue to survive at $140 oil.”

Measures to limit so-called index speculation are needed before Congress’ recess next month, James May, head of the Air Transport Association (ATA) trade group, said Friday at a news conference in Washington. Crude rose 2.4 percent to $145.02 a barrel in New York trading.

“There is no greater crisis,” Mr. May said, adding that most airline business plans are built on oil at $85 to $90 a barrel. Prices at current levels will have “serious consequences,” should they persist through the rest of the year, he said.

Friday’s offensive intensified the airlines’ efforts to stem industrywide losses that the ATA estimates may reach $13 billion this year. Mr. May said a new Web site generated more than 1 million e-mail messages to Congress in the past three days.

Sen. Joe Lieberman, Connecticut independent, proposed a bill Friday designed to restrain prices. His measure would limit the amount of oil and commodity futures that could be held by institutional investors such as pension funds. These investors trade commodities as financial instruments and almost never take delivery of the food or energy products.

Airlines began sending letters promoting the Web site, Stop Oil Speculation Now, to members of their frequent-flier programs this week. The letters were signed by 12 chief executive officers from carriers including American Airlines.

“Ultra-expensive fuel means thousands of lost jobs and severe reductions in air service,” the CEOs wrote. “We need your help.”

The biggest U.S. carriers are cutting seating capacity by more than 10 percent each, parking 430 aircraft and slashing about 20,000 jobs in response to a 97 percent surge in jet fuel prices over the past year.

The “normal” oil price should be around $65 to $75 a barrel, and the speculative premium may be $20 to $60 more than that, Mr. May said.

About 88 percent of airlines’ current fares go just to cover fuel costs, taxes and fees, Mr. May said. “We cannot continue to operate unprofitable flights.”

Congress also should require the Commodity Futures Trading Commission to collect more information on each transaction, Mr. May said, which Mr. Lieberman’s proposal does.

The senator’s plan would help airlines, said Michael Masters, a hedge fund manager and founder of Masters Capital Management LLC, who spoke at the ATA press conference.

Masters Capital owned 4.08 million shares in American parent AMR Corp., United Airlines parent UAL Corp., Delta Air Lines Inc. and US Airways Group Inc. as of March 31, according to data compiled by Bloomberg.

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