=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2005/09/01/BUG7OEG7C1= 1.DTL --------------------------------------------------------------------- Thursday, September 1, 2005 (SF Chronicle) Airlines hit hard/Storm damage jacking up fuel prices for struggling carrie= rs David Armstrong, Chronicle Staff Writer Hurricane Katrina has done more than ground hundreds of commercial airli= ne flights in the South -- it has reduced already strained supplies of crude oil and threatened to send the price of jet fuel higher. The price of jet fuel has soared more than 20 percent since the last trading day before Katrina's descent Monday on the Gulf Coast. All told, jet fuel now sells for nearly 50 percent more than it sold for at the start of the year. And the price is likely to go even higher in coming weeks, because Katri= na has knocked out Gulf Coast oil-drilling platforms, refineries and port operations, squeezing the supply of the crude oil from which jet fuel is refined. The price of crude closed Wednesday at $68.94 per barrel, down from the overnight price of $70.85, on news that Washington is releasing national oil reserves to refiners. The price is below the inflation-adjusted historical high of $90 per barrel set in 1980, but still sharply higher than early this year, let alone several years ago. Oil sold for about $20 per barrel in 2001. The consequences of the double blow of rising prices and falling supply, airline experts say, will send ailing airlines to even deeper losses, raising the possibility of bankruptcy for some carriers and higher airfares for travelers. Damage from Katrina has shut off about one-fifth of U.S. oil-refining capacity and reduced supplies to the nation's airlines by 13 percent since Monday, said Jack Evans, a spokesman for the Air Transport Association. The association is responding to the shortage by flying tankers of fuel = to airports around the country, he said. Compounding the airline industry's problem, Evans said, is the temporary closure of two pipelines from Texas and New Orleans to East Coast airports. Airlines typically refuel their planes at airports between flights. On the positive side, Evans said, reduced fall schedules that kick in every year after Labor Day will return next week, cutting the amount of fuel that airlines will need. So far, no airline has canceled flights because of a lack of fuel, though Atlanta-based Delta Air Lines has scrubbed hundreds of flights in the Southeast because of closed airports and rough weather. Similarly, Houston's Continental Airlines canceled 111 of its scheduled 3,000-plus flights Wednesday for the same reasons. JetBlue Airways said Wednesday it will scrub all of its New Orleans flights at least through Sept. 8, citing the lack of electrical power at storm-damaged airports. Delta, which has lost about $10 billion since 2000, is a major airline in the ravaged Southeast region. Analysts have said in recent weeks that Delta is a leading candidate for Chapter 11, where it would join United Airlines, US Airways and ATA Airlines. No U.S. airline has said it will raise fares because of Katrina-driven higher fuel costs, but foreign carriers are already doing so, even though they are far from the storm-damaged area. Australian carrier Qantas Airways is raising its fuel surcharge on ticke= ts for the fifth time since May, while Hong Kong's Cathay Pacific Airways plans to increase its fuel surcharge for the seventh time since May 2004, the airline said Wednesday. Price increases by U.S. airlines are all but inevitable, said Henry Harteveldt, chief analyst in the San Francisco office of Forrester Research. "Fares have to go up, and rightly so," he said. "Any time the cost of delivering a product goes up, the price has to go up as well." San Francisco International Airport, Northern California's largest airport, has its usual three-day supply of fuel on hand, with no disruptions in supply, said airport spokesman Michael McCarron. SFO, he said, gets all its jet fuel from refineries in Richmond via a pipeline under the bay. United, the bankrupt carrier that dominates SFO with about half of all passengers and flights, has not canceled any flights because of lack of fuel. "We're monitoring the situation closely and staying in touch with our suppliers," said spokesman Jeff Green on Wednesday. Northwest Airlines, which continues to fly for a second week using replacement workers for its striking mechanics, is operating all 18 of its daily departures from SFO, but is safeguarding supplies by shipping fuel to four other markets: Las Vegas, Orlando, Tampa and Fort Myers, Fla., according to Northwest spokesman Kurt Ebenhoch. Fuel prices, which have jumped by nearly half since the start of 2005, a= re hurting Northwest, said Ebenhoch, who added, "Every $1 rise in the cost of a barrel of crude oil negatively impacts our bottom line by $50 million a year. " Northwest has been mentioned along with Delta as a possible candidate for Chapter 11, because of continuing heavy losses. Katrina has only made the situation worse. "None of this is good news for any airline," Harteveldt said. E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx --------------= -------------------------------------------------------- Copyright 2005 SF Chronicle