Video: Struggling airlines solicit aid

updated 7/9/2008 7:50:22 PM ET 2008-07-09T23:50:22

The chief executive officers of a dozen U.S. airlines, beset by record fuel costs that have caused several to cut jobs, reduce capacity and impose higher fees on customers, are now asking for their customers' help to curb the rise of oil prices.

They have co-signed a letter being sent to frequent fliers of their respective carriers, asking customers to contact Congress about the problem of market speculation, which they believe is driving up the price of oil.

"This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers," the letter states. A copy was received by The Associated Press on Wednesday.

Lawmakers have cited the problems high fuel prices cause airlines, trucking companies, farmers and consumers in calling for restrictions on speculative trading.

Northwest Airlines Corp. Chief Executive Douglas Steenland urged lawmakers in June to close loopholes that allow traders to dodge U.S. speculation limits by trading on foreign exchanges or through over-the-counter transactions.

"Our highest priority is to tackle the overall price of fuel which is now 40 percent of our cost pie," Steenland told lawmakers. "Addressing excessive speculation is the most immediate remedy Congress could deliver."

The letter from the airlines acknowledges that oil prices are partly a response to normal market forces, prompting a need for the country to focus on increased energy supplies and conservation.

"However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation," the letter says.

The letter says speculators buy up large amounts of oil and then sell it to each other again and again. The price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs, the letter says.

It adds that regulations established decades ago by Congress to control excessive market speculation have been weakened or removed over the years.

"We need your help," the letter to customers says. "Get more information and contact Congress."

It is signed by the CEOs of Northwest Airlines, AirTran Airways, Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Midwest Airlines, Southwest Airlines, United Airlines and US Airways.

Kevin Healy, senior vice president of marketing and planning for AirTran Airways, a subsidiary of AirTran Holdings Inc., said in an interview that while airlines often band together to address congestion and other issues, the letter is unique since it is a public appeal.

"I think it does demonstrate this as an exceptionally important issue, and we feel it's important that Congress act quickly," Healy said.

He said the issue is not only the impact on jet fuel prices but also on the economy as a whole.

"It's sort of a double whammy for airlines in that we have the direct expense of operating the aircraft ... and high energy costs creep into every aspect of the economy and will have an impact on overall demand."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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