Soaring Fuel Prices Catastrophic for Airlines

The Air Transport Association (ATA)
today urged Congress to schedule oversight hearings to review the impact
of record-high fuel prices on the transportation industry as soon as
possible.
In letters addressed to Sens. John McCain and Fritz Hollings, chairman and
ranking member of the Senate Committee on Commerce, Science and
Transportation, and Reps. Don Young and James L. Oberstar, chairman and
ranking member of the House Committee on Transportation and
Infrastructure, the ATA Board of Directors reviewed the significant impact
that escalating fuel prices are having on the airlines and the entire
transportation industry.

The letter states: “While the soaring price of fuel is a huge problem for
the economy, it is rapidly becoming a catastrophe for the airline
industry. At today’s prices, the fuel bill for U.S. airlines will be $6
billion more than it would have been with last year’s prices.”

The feverish speculation in the oil markets threatens to wipe out all the
benefits from post-9/11 Government support and employee sacrifices. The
airlines are asking Congress to consider not only whether the federal
government should immediately stop acquiring oil for the Strategic
Petroleum Reserve, but also whether it should begin to sell some reserves
to increase supply and bring stability to the markets.

The Air Transport Association is the trade association for the leading
U.S. airlines. ATA member airlines transport 95 percent of all passenger
and cargo traffic in the United States. The association’s board of
directors consists of senior executives from ATA member airlines.

The Air Transport Association Board of Directors sent the following letter
to Sens. John McCain and Fritz Hollings, chairman and ranking member of
the Senate Committee on Commerce, Science and Transportation, and Reps.
Don Young and James L. Oberstar, chairman and ranking member of the House
Committee on Transportation and Infrastructure:

ADVERTISEMENT

August 24, 2004

While the soaring price of fuel is a huge problem for the economy, it is
rapidly becoming a catastrophe for the airline industry. At today’s
prices, the fuel bill for U.S. airlines will be $6 billion more than it
would have been with last year’s prices. For the past few weeks, that
number has become larger day after day.

That means that all the benefits from the support that you have given the
industry since 9/11 and all the sacrifices that our employees have made
could be wiped out by the feverish speculation in the oil markets. While
we certainly are not experts about what is driving up the price of oil, it
is clear that the cost of production has not changed measurably in a year.
Therefore, somewhere in the distribution process someone is making
extraordinary profits.

Every carrier in our industry is feeling the impact. We are all under
intense pressure to conserve cash in order to pay our fuel bills. That
means less capital investment, more debt, fewer jobs and reductions in
service.

Therefore, we write to urge the Commerce Committee to hold an oversight
hearing as soon as possible to review the impact of current oil prices on
the transportation industry. We are convinced that the only thing that
will stop the wild increase in prices is fear by the speculators that the
U.S. government is ready to step in with actions that could either
increase supply or reduce demand.

To that point, we hope that Congress will consider not only whether the
federal government should immediately stop acquiring oil for the Strategic
Petroleum Reserve, but also whether it should begin to sell some reserves
in order to increase supply and bring stability to the markets.

We are all ready to cooperate completely with the Committee on any
oversight activities in which it engages.
  Sincerely,

  Gerard J. Arpey
/  Chairman, President & CEO
/  American Airlines
/  Chairman of the Board
/  Air Transport Association

  Joseph C. Hete
/  President & CEO
/  ABX Air Inc.

  Bill Ayer
/  Chairman, President & CEO
  /  Alaska Airlines, Inc.

  Glenn R. Zander
/  President & CEO
/  Aloha Airlines, Inc.

  Douglas Parker
  /  Chairman, President & CEO
/  America West Airlines, Inc.

  J. George Mikelsons
  /  Chairman, President & CEO
  /  ATA Airlines

  Jeffrey Erickson
  /  Chief Executive Officer
  /  Atlas Air Worldwide Holdings

  Gordon Bethune
  /  Chairman & CEO
  /  Continental Airlines, Inc.

  Gerald Grinstein
  /  CEO
/  Delta Air Lines, Inc.

  David Neeleman
  /  CEO
  / JetBlue Airways, Corp

  Jerry Trimarco
  /  CEO
/  Menlo Worldwide

  Timothy E. Hoeksema
  / Chairman, President & CEO
  /  Midwest Airlines

  Richard H. Anderson
  / Chief Executive Officer
  / Northwest Airlines

  Herbert D. Kelleher
  / Chairman of the Board
  / Southwest Airlines Co.

  Glenn Tilton
  / Chairman, President & CEO
  / United Airlines

  John Beystehner
  / President
  / UPS Airlines

  Bruce R. Lakefield
  / President & CEO
  / US Airways, Inc.

  Mr. Edward Connolly
  / Executive Vice President
  / Evergreen International Airlines
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