by Brendan M. Lynch | October 01, 2005
James C. MayThe devastating storm season has pushed 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 To curb costs, jetliners have employed single-engine taxiing, flown at higher altitudes and carried extra fuel to avoid fill-ups at expensive airports.
    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.