U.S. Airlines May Lose Up to $13 Billion This Year

By Daniel Whitten and Mary Schlangenstein

June 17 (Bloomberg) -- U.S. airlines may lose as much as $13 billion in 2008 as surging fuel prices outpace fare increases, the chief of the Air Transport Association told a Senate committee.

This year's financial results will be ``on par'' with the industry's worst ever as carriers' combined fuel costs reach $61 billion, ATA Chief Executive Officer James May said today. The record annual loss is $11 billion in 2002, according to the ATA.

``I don't think anybody predicted this extraordinary jump in prices,'' said May, whose group represents the biggest U.S. carriers. ``It's the sole issue, it is the sole issue,'' affecting airlines' financial performance.

May forecast a profit of as much as $4.5 billion for U.S. carriers in January and later projected a ``multibillion- dollar'' loss. His updated forecast today was for a loss of $7 billion to $13 billion.

AMR Corp.'s American Airlines, UAL Corp.'s United Airlines, Delta Air Lines Inc., Continental Airlines Inc. and other carriers have said they will ground as many as 378 planes and cut at least 10,300 jobs in response to the jump in fuel costs.

The higher price also has caused a drop in new plane orders and the discontinuation of service to 100 communities, May told a Senate Agriculture subcommittee. That number may grow to 200 should prices continue to climb.

Jet fuel for immediate delivery in New York Harbor fell 1.4 cents to $3.93 a gallon today. The price hit a record $4.09 a gallon on May 21. Fuel has jumped 81 percent in the past year, surpassing labor as the U.S. airlines' largest expense.

May's fuel-cost estimate marks an increase of about 2.5 percent over the projection he gave May 13, when he said airlines would spend $59.5 billion. The record is $41.2 billion, set last year, the trade group has said.

To contact the reporters on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

Last Updated: June 17, 2008 15:48 EDT