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Airfares Expected Rise After Hurricane Katrina

Posted on: Wednesday, 31 August 2005, 21:00 CDT

Sep. 1--Airline passengers can expect to pay higher fares in coming weeks as a result of Hurricane Katrina. The storm badly damaged Gulf Coast oil refineries, leaving them unable to process jet fuel, industry experts said yesterday.

The soaring fuel prices could push two struggling airlines -- Northwest, whose mechanics and cleaners are on strike, and Delta -- closer to bankruptcy, some analysts said. The airlines declined comment.

Higher fuel prices, which are expected to hit so-called legacy carriers as well as low-cost airlines, are going to be passed along to consumers, who have been enjoying lower fares for most of this year and last, the result of intense competition, the experts said.

Before Katrina swept through several Southern states this week, airlines were paying about $1.75 a gallon for jet fuel. Since last Friday, when fears began spreading of a storm that could wreak considerable damage, the price has risen about 19 percent.

The Air Transport Association, the trade group representing major airlines, said the supply of jet fuel has been cut by 13 percent because the Gulf of Mexico refineries are not operating.

"The [fuel price] increases have been enormous and swift," said David Stempler, executive director of the Air Travelers Association in Washington. "The expectation is that anything fuel-based is going to see higher prices."

Jenny Dervin, a spokeswoman for JetBlue Airways Corp., the Forest Hills-based low-cost carrier, said the airline is "not immune" from rising fuel costs. Dervin said that in the second quarter, JetBlue paid about $1.50 a gallon, up from 97 cents a gallon in the same period last year. She declined, however, to say whether the airline would raise fares.

"We're making sure we're not over-pricing the market and offering a fair fare, but one that reflects fuel costs," she said.

At Delta's headquarters in Atlanta, spokeswoman Chris Kelly said the airline is "working closely with our fuel suppliers to ensure contingency plans are in place, should they be necessary." Kelly declined to comment when asked whether the higher prices would push Delta further toward a Chapter 11 filing.

"All the airlines are hurting," said Dan Kasper, who follows the industry for LEGC, a Cambridge, Mass., consulting firm. "It's reasonable to expect there will be efforts by carriers to try to increase fares."

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NWAC, DAL, JBLU,

Source: Newsday, Melville, N.Y.

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