- The Washington Times - Tuesday, February 28, 2006

The nation’s airlines will face another difficult year in 2006 but could rebound next year, federal regulators and industry leaders predicted yesterday.

Fuel prices will rise 15 percent in 2006 before declining until 2011, the Federal Aviation Administration estimated in its 31st annual industry forecast. Airlines are paying about $1.81 a gallon for jet fuel now.

“This year’s forecast is a momentary bump in the road of what has been real growth,” FAA Administrator Marion C. Blakey said.

But until fuel prices fall, airlines face a grim future, Southwest Airlines Chairman Herb Kelleher said.

“I would say the industry is going to continue to experience difficulties obtaining an adequate return on capital as long as fuel prices remain high, and I think fuel prices will remain high,” he said.

Airlines have been hammered by losses, and major carriers including Delta Air Lines and Northwest Airlines remain in bankruptcy. Overall, the industry will post a loss of more than $4 billion this year and likely will not make a profit until 2007, the International Air Transport Association predicted in January.

U.S. airlines posted a combined net loss in fiscal 2005 of $11.8 billion, according to the FAA, and their net losses over the past five years total $37 billion.

“We don’t know if they’re out of the woods yet,” said Nan Shellabarger, director of the FAA’s office of aviation policy and plans.

Airlines also must raise fares or widespread losses will continue, said American Airlines Senior Vice President William Ris.

“If fares don’t come up a little bit, more people are going out of business,” he said.

Consumer demand in air travel remains strong, but the FAA predicts a modest 0.2 percent decrease in domestic passengers in fiscal 2006 because some carriers, including American Airlines, are eliminating domestic routes to save money. Airlines carried 738.6 million passengers last year; the FAA predicts 1 billion passengers will travel by 2015.

With fewer flights, demand for available seats is strong. Airlines are selling nearly 80 percent of their seats, Mr. Ris said.

A new phenomenon has given greater urgency to efforts to make the nation’s air traffic control system more efficient. FAA officials are bracing for a proliferation of so-called “very light jets.” About 100 of the small jets, which seat up to six people, will begin flying this year, FAA officials said. There could be as many as 5,000 of the small jets by 2017.

“Clearly our skies are going to be very, very busy,” Transportation Department Secretary Norman Y. Mineta said.

That could make congestion at airports and in the skies worse, officials predict.

Mr. Mineta last week gave Washington Dulles International Airport $200 million over 11 years to build a fourth runway to deal with congestion at the increasingly busy airport. Mr. Mineta said yesterday he is making $26 million available to Hartsfield-Jackson Atlanta International Airport to improve traffic flow on runways at the nation’s busiest airport and relieve congestion there.

Also yesterday, Mr. Kelleher said major commercial airlines that make up the Air Transport Association, an industry trade group, agreed on a proposal to fund the Aviation Trust Fund.

The trust fund finances the nation’s aviation system, and taxes on passenger tickets finance the fund. But transportation officials want to alter the method used to raise money because years of lower ticket prices have meant less money in the trust fund, which has a $1.9 billion balance.

The Air Transport Association is endorsing a funding plan that is based on a carrier’s use of the system, rather than on fares. Commercial carriers object to the ticket tax because it means business planes pay less. Commercial airlines account for roughly two-thirds of all airplane traffic but pay 90 percent of taxes that go into the trust fund. They are lobbying for a more equitable tax plan.

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