Fuel Costs in Katrina's Aftermath Will Affect Airlines

American Airlines and Southwest Airlines cancelled hundreds of flights Monday as Hurricane Katrina pounded the Gulf Coast, and industry experts worried about the storm's impact on jet fuel prices.

Fort Worth-based American and its regional affiliate, American Eagle, cancelled more than 100 flights to New Orleans and smaller cities including Jackson, Miss.; Mobile, Ala.; and Pensacola, Fla. Dallas-based Southwest cancelled 145 flights in New Orleans, Jackson and Birmingham, Ala.

Southwest is the largest carrier in New Orleans and accounts for nearly 30 percent of passengers at the city's Louis Armstrong International Airport. American carries about 13 percent of the airport's traffic.

Both airlines are allowing passengers to rebook tickets to and from affected cities without fees. Officials recommended travelers contact the airlines as soon as possible for more information.

Experts said that while the storm will be a financial hit for the carriers, the damage from flight cancellations will probably be minor.

"It's not going to be a huge deal," said Mike Boyd, an airline consultant with the Boyd Group of Evergreen, Colo. "The effects will be short term, especially for American."

Atlanta-based Delta Air Lines could fare the worst, because the carrier has the most extensive operations in the Southeast. Delta's hubs in Atlanta and Cincinnati could be affected, Boyd said. "For Delta, this could be fairly significant," he said.

The impact on fuel prices, however, could be a greater problem for the industry overall. Oil prices hovered around $68 per barrel Monday on fears that the hurricane could slow down production and refining along the Gulf coast. It had briefly topped $70 per barred on Sunday.

The airlines have been struggling to cope with high fuel prices, which has pushed some carriers to the brink of bankruptcy. Some analysts predict that Delta Air Lines and Northwest Airlines, in particular, could face bankruptcy before the end of the year.

United Airlines and US Airways are already in bankruptcy. Filings by Delta and Northwest would leave American and Houston-based Continental as the only major hub carriers not under Chapter 11 protection.

"Jet fuel prices are crushing, and could prove to be a knock-out blow for some," said John Heimlich of the Air Transport Association, an industry trade group, in a recent report on fuel prices.

Executives with American said they continue to closely monitor fuel prices.

"Each one of these shocks in oil prices further exacerbates the problems the industry is facing," said Tim Wagner, a spokesman.

The hurricane signaled an ominous end to a summer travel season that saw a strong rebound in travel. Traffic demand was high, with many airlines reporting record passenger loads in June and July.

But oil prices have dampened the success of the season, with the exception of Southwest, which has fuel hedges in place to reduce the impact of high prices.

Stock in AMR Corp., American's parent closed at $13.40 per share, down 26 cents. Southwest shares ended at $13.44, down 7 cents.

Copyright 2005 Associated Press

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