Talk of Iraq war hurts already-struggling airlines By Dan Reed and Marilyn Adams, USA TODAY Rumblings of possible war with Iraq are inflicting pain on still-staggering U.S. airlines and raising the possibility of new fuel surcharges on tickets in the short run. In the past month, jet fuel prices jumped as much as 30% to 88 cents a gallon on the spot market. Consumers are flying less than expected. And the price of security-related and war-risk insurance continues to soar even as the carriers struggle to cut costs. Meanwhile, most airline stocks, down since last year's terrorists attacks, have tumbled in recent weeks to the lowest inflation- and split-adjusted levels in a quarter century. They fell again Wednesday after a Merrill Lynch analyst downgraded the stocks of Delta, Northwest and Continental airlines and widened his loss estimates on most carriers. Delta President Fred Reid said Wednesday that more jobs will be cut there. "I'm seeing a lot of pain for big airlines," said Ben Brockwell, editor of the Oil Price Information Service's newsletter. Jet fuel prices rose faster than crude because refiners trimmed production more, he says. And airlines haven't hedged enough to protect against short-term price run-ups this fall and winter. U.S. light crude rose 40 cents Wednesday in New York to $29.48. In the past, a price of $30 has served as an alarm for economists and policymakers. At least through the fourth quarter, Brockwell says, higher prices are inevitable. "The airlines are not crying wolf." American and United have doubled their fuel surcharge on cargo shipments. And some analysts expect new or larger passenger fuel surcharges this fall and winter. "The industry's financial condition is perilous," much more so than on the eve of the Gulf War in 1991, says the Air Transport Association's Michael Wascom. The ATA wants Congress to lock in for six months the rates on war risk insurance, so the cost won't bankrupt airlines overnight if the shooting starts. ATA also seeks relief from some security-related fees and costs that airline executives complain fall too heavily and unfairly on the industry's shoulders. But the potential drop in the number of people flying is the airlines' biggest war concern, says Phil Baggaley, Standard & Poor's airline bond analyst. A big decrease in demand might force carriers to drop prices to very low levels to stimulate demand and generate cash. Fliers would benefit in the short term, but the destabilization of the industry could lead to airline failures and mergers. The owner of Roger's Trinbago Site: Roj (Roger James) *************************************************** escape email mailto:ejames@escape.ca Trinbago site: http://www.tntisland.com CBC Website http://www.tntisland.com/caribbeanbrassconnection/ The Trinbago Site of the Week: (ReadyMix) http://www.readymix.co.tt/ (ReadyMix Cement Ltd) courtesy of Roj Trinbago Website & TnT Web Directory Roj's Trinbago Website: http://www.tntisland.com TnT Web Directory: http://search.co.tt *********************************************************