The devastating storm season
airfares higher for meeting attendees and has helped drive two
major U.S. air carriers into bankruptcy. The cause is the
availability and cost of jet fuel: Damage to Gulf Coast oil
refineries, pipelines and rigs from Hurricane Katrina alone cut
daily U.S. production by 13 percent, according to the Washington,
D.C.-based Air Transport Association.
“For the airlines, the immediate impacts of Katrina were
reduced fuel supplies, some airport closures and dramatically
increased fuel prices,” said James C. May, right, ATA president and
CEO. Following Katrina, the price of jet fuel peaked at $2.36 per
gallon, May noted, and as of mid-September it stood at $1.92 per
gallon, a 243 percent increase over four years.
On Sept. 7, Eagan, Minn.-based Northwest Airlines suspended
service between New York’s JFK and Tokyo’s Narita airports, citing
the soaring cost of jet fuel. A week later, the carrier filed for
Chapter 11 bankruptcy. Plans to operate the airline profitably were
“overtaken by skyrocketing fuel costs,” said Doug Steenland,
Northwest’s president and CEO.
Atlanta-based Delta Air Lines, already under pressure from high
fuel prices, declared bankruptcy on the same day as NWA. Now, four
of the six so-called legacy airlines are operating under court
protection from their creditors.
High fuel costs will plague the industry moving forward, say
analysts. “Airlines are concerned because refineries make more
money refining gasoline for cars than jet fuel,” said Terry
Trippler, airline expert with Cheapseats.com. To curb costs,
jetliners have employed single-engine taxiing, flown at higher
altitudes and carried extra fuel to avoid fill-ups at expensive
Another result of the fuel pinch looks to be higher fares and
fuel surcharges for flyers. After Katrina, many international
carriers increased surcharges, including British Airways, Lufthansa
and Virgin Atlantic. Some U.S. carriers upped fares outright:
“United made the first move,” said Trippler. “United raised 256,000
fares by $5 to $50.” Other fare hikes have been posted by American
Airlines, Delta and NWA in recent weeks.