US airlines, pilots push Congress to place restrictions on oil speculators
Monday July 14, 2008 The Air Transport Assn., Air Line Pilots Assn. and Regional Airline Assn. joined together Friday to call on Congress to pass legislation putting limitations on oil speculation, asserting that the "economic market [for oil] has become divorced from the physical market" and driven the per-barrel price to a point that threatens the viability of the air transport industry.
"This whole business of the way oil is traded is having a dramatic impact," ATA President and CEO James May told reporters in Washington. "Oil has become the new gold. It has become a financial tool." He claimed "index speculators" that trade in commodities futures have pushed the per-barrel price well past the $65-$70 "cost of production" to sustained levels above $140. Consequently, by year end US carriers will have cut 30,000 workers and dropped service entirely to more than 100 destinations, he said. ALPA President John Prater added, "There is a crisis in our industry and we must get our hands around the price of fuel. . .[which is] driving the air transportation system in the US into the ground."
ATA, ALPA and RAA are members of the newly formed Stop Oil Speculation Now coalition (ATWOnline, July 11) that plans an "aggressive" lobbying campaign to push Congress "immediately" to impose "position limits on index speculative trades" and establish "reporting requirements" for large-scale speculators, May said. He added that while the coalition understands there is "a purpose" to speculation, restrictions need to be put in place to bring "some balance" to the market. "If we were able to bring the price of oil down $30 per barrel, we'd be pretty happy," May said. "There's not a carrier in the business that has suggested we could continue to survive if oil prices continue to sustain over $140." He noted that the average cost of a domestic US flight ticket is $190 and the per-passenger fuel cost averages $138. "Add in $30 in taxes and fees and you have less than $30 per ticket to run the rest of the airline," he said. "This situation is worse [for airline finances] than 9/11."He rejected last week's assertion by Dept. of Transportation General Counsel D.J. Gribbin that the current level of oil speculation is "not unusual at all" and prices are driven by "a significant increase in demand, primarily in Asia." Said May, "The current DOT has demonstrated a lack of expertise in a number of different areas. This is just the latest." by Aaron Karp
