Fuel prices imperiling airlines, officials warn

November 10, 1990|By Laurie McGinley | Laurie McGinley,Dow Jones News Service

WASHINGTON -- Top airline officials warned the Bush administration that soaring jet-fuel prices could spell doom for some carriers within months.

In meetings over the past two days with Transportation Secretary Samuel K. Skinner and Energy Secretary James D. Watkins, the airline officials painted a picture of impending disaster, according to one participant.

One industry official predicted that the rising fuel costs could trigger a major industry consolidation within 180 days. Others said that four or five carriers are in dire straits, participants said.

[Pan Am Corp., Trans World Airlines Inc. and Continental Airlines Holdings Inc. are considered among the most vulnerable airline companies, Reuters reported.]

The airline industry wants the government to take steps to drive down jet-fuel prices. For example, they would like the administration to publicly urge a lowering of the prices. But the industry isn't unified on other steps, including use of the Strategic Petroleum Reserve.

Among those participating in the meeting were Thomas Plaskett, chairman of Pan Am; Carl C. Icahn, chairman of TWA; Fred Malek, vice chairman of Northwest Airlines; David Hinson, chairman of Midway Airlines; Ron Allen, chairman of Delta Air Lines; James Guyette, executive

vice president for operations, United Airlines; and Robert Aaronson, president of the Air Transport Association, the airlines' trade group.

Robert Crandall, chairman of American Airlines, and Hollis Harris, chairman of Continental Airlines, were scheduled to meet with Mr. Skinner yesterday.

The meetings, which were called by Mr. Skinner, come amid industry losses. In the fourth quarter alone, the industry is expected to have a record loss of $1 billion.

Industry officials have cited jet-fuel prices, which are 63 percent higher than before the start of the Persian Gulf crisis, as the main reason. But passenger demand also is weakening.

["It is honestly an effort of trying to find out a lot more than we know now," Reuters quoted a source saying. "We are trying to isolate what steps the administration could take."

[Mr. Skinner has said he feels strongly about assisting the airline industry, hit hard by soaring oil prices since the Aug. 2 invasion of Kuwait by Iraq. Industry officials told Mr. Skinner in the meetings that if the price increases persist, some airlines could fall by the wayside within months.

[Last month, jet-fuel prices topped $1.40 a gallon as military demand surged and supplies tightened because of the gulf crisis.

[Before the invasion, fuel -- airlines' second-biggest cost after labor -- was about 59 cents a gallon. Jet fuel now costs about $1.10 a gallon.]

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