- The Washington Times - Thursday, June 19, 2008

DALLAS | Airlines executives continue to cut jobs and consider new fees on passengers as they battle high fuel prices that could result in record losses for the nation’s carriers.

Executives from United Airlines elaborated on plans to shed up to 1,600 salaried jobs at an investors’ conference in New York on Wednesday.

Chief Financial Officer Jake Brace said United also will cut union jobs - pilots, flight attendants and mechanics - once the airline draws up a scaled-back flying schedule for fall and winter.

Delta Air Lines Inc. said it will cut domestic capacity another 3 percent later this year, atop a previously announced 10 percent reduction. The carrier said this year’s fuel costs would rise $4 billion from 2007.

Continental Airlines Inc., which boasts about still serving meals in coach, is studying whether it will join the chorus of carriers charging to check a first bag, according to its CEO.



The lone profitable big carrier so far this year, Southwest Airlines Co., still expects to grow modestly through next year - but that’s not a sure thing.

“If we have to slow our growth to zero next year, we’re obviously prepared to do that,” Southwest Chief Executive Officer Gary C. Kelly said at the investors’ conference.

The common threat hanging over all the carriers is the cost of fuel, which has risen for years and nearly doubled in the past 12 months.

On Tuesday, the Air Transport Association, a trade group for the big airlines, warned that the industry could lose a record $13 billion this year.

Forecasts such as this one have renewed talk that big airlines could face bankruptcy by early next year unless fuel prices fall or fares rise sharply.

Delta provided a speck of encouraging news Wednesday by saying it expects to post a second-quarter profit, excluding one-time items. Delta lost $6.4 billion in the first quarter, though $6.1 billion was an accounting charge to write down the value of its assets. (AMR said Wednesday it will take a write-down but didn’t give a figure.)

Carriers are responding to high oil prices by raising fares nearly two dozen times this year and increasing fees for everything from taking pets aboard to changing itineraries.

American took “a little bit of flack” for imposing a $15 fee on the first checked bag, said Gerard J. Arpey, chief executive of American and parent AMR Corp. But United and US Airways matched it, and Continental also is considering it, though Continental Chief Executive Officer Lawrence W. Kellner said he worries about boarding delays as customers try to stuff more in their carry-ons.

Airlines also have announced plans to ground dozens of jets and eliminate many flights once the peak summer travel season ends.

Fewer flights should save the airlines money by burning less fuel, paying fewer pilots and mechanics, and giving them more power to raise fares.

“That’s good news because the cumulative effect of all these steps will be good for the industry and for American in the long run,” said AMR’s Mr. Arpey.

But for now, he said, fares and fees aren’t high enough to cover American’s annual fuel bill, which figures to be $7.5 billion higher this year than in 2002.

“If we’re going to have an airline business, and I’m pretty sure we are, our customers must ultimately compensate us for the costs that we incur flying them around the United States and the world,” Mr. Arpey said.

Despite higher fares and fears of a weakening economy, demand for travel appears to be holding up. In a regulatory filing Wednesday, AMR said its revenue per mile flown by passengers would rise 5.9 percent to 6.9 percent for the second quarter.

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