Airline Industry Launches Lobbying Campaign to Fight Oil Speculators

Jul. 11 — WASHINGTON — The troubled airline industry is launching a lobbying campaign that blames speculators for ballooning fuel prices, but the carriers face stiff opposition to their energy plan from other lobbying powerhouses and some skeptical members of Congress.

On a new Web site, the Air Transport Association — the trade group that represents both Fort Worth-based American Airlines Inc. and Dallas-based Southwest Airlines Co. — blames regulators for permitting rampant speculation.

It also fingers the defunct Enron Corp. for fashioning a trading loophole that allows traders to "manipulate oil prices and corner the market without anyone knowing."

Some airlines are e-mailing travelers about the problem and asking customers to demand that Congress impose new rules.

"This is an issue of doing anything we can to try and bring this completely out-of-control market under control," said James May, the ATA's president and CEO. "This is an issue of economic magnitude that dwarfs 9/11."

Mr. May said cracking down on speculators is one of the few immediate options available to lower fuel prices.

But the federal government has hesitated to impose limits, and the Bush administration isn't convinced that hedge funds and other players, who have poured billions into commodity markets, are driving up prices.

"We have not seen evidence that speculating has been a primary driver behind the high cost of oil," said D.J. Gribbin, general counsel of the Transportation Department.

Several bills that would limit the types of investors that could invest heavily in the energy futures market are circling in Congress.

Some lawmakers want to distinguish so-called commercial users, such as airlines, that use the futures markets to hedge against high fuel prices.

Others that don't use petroleum products, such as hedge funds, would have to put up significantly more cash to invest in energy futures.

But speculation doesn't appear to be at the top of fixes proposed by congressional Democrats, who are on the defensive as fuel prices have spiked in recent months.

At a news conference Thursday, House Speaker Nancy Pelosi outlined a bigger energy package that emphasized domestic supply.

Ms. Pelosi said releasing oil from the nation's emergency stockpile was "the fastest way to bring down the price at the pump."

Speculation was mentioned, but only after several other measures.

Earlier this week, Sen. Joseph Lieberman of Connecticut dropped an idea to keep institutional investors out of commodity futures markets.

"That showed the progression of this issue from pure politics to education, moving out on the learning curve and beginning to understand the implications," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, which opposes new restrictions on energy trading.

Other groups are lobbying against the airlines' effort, while noting that most carriers are speculators, too.

Most carriers sold their fuel hedges after the Sept. 11 attacks, when they needed cash. But Southwest Airlines, the most profitable US airline, has continued.

It estimates that gains from energy trades would reduce its per-gallon fuel bill to $2.35 in the second quarter, much lower than the current spot price of about $4 per gallon.

But while other airlines have started hedging again, some have lost money by speculating.

"Whether they didn't properly hedge, or simply want to pass higher fuel costs on to customers, trying to pass the buck to financial markets is misguided," said Gregory Zerzan, head of global public policy for the International Swaps and Derivatives Association.

Tim Wagner, an American Airlines spokesman, said the carrier isn't e-mailing its customers about regulating speculators. But Mr. Wagner said the carrier might add information about the issue to its Web site.

Southwest CEO Gary Kelly signed on to the ATA's effort, but the company didn't respond to inquiries about whether it would alert customers to the industry's campaign.

Mr. May said airlines are committed to the new strategy, which they'll kick off with a news conference today.

The ATA president said the campaign would enlist help from union leaders and send hundreds of thousands of e-mails to Congress from travelers and airline employees.

Airlines "are lobbying with their lobby staff, and the CEOs are coming to town and they'll continue to come to town," Mr. May said.