Cost Of Jet Fuel Likely To Cause Losses For Northwest And Other Airlines

Source: Seattle Post-Intelligencer Publication date: Mar 06, 2000

Northwest Airlines Corp. Chief Executive John Dasburg said the airline and other carriers will likely post losses in 2000 if jet fuel prices stay at their current high levels.

"If fuel prices stay at this level, carriers will post losses, including us," Dasburg said in an interview at the headquarters of the nation's fourth-largest airline.

Rising fuel costs have already caused the airline to hold off on purchasing new aircraft.

"There were purchases that we were contemplating that we are now delaying," Dasburg said.

Low oil inventories and production cuts by the Organization of Petroleum Exporting Countries have pushed jet fuel prices to the highest levels since the Gulf War.

Fuel is an airline's second-largest cost after labor. For Northwest, each penny increase in fuel prices costs the airline $20 million annually, a spokesman said. The energy shock caused by the Gulf War led to tough times for airlines in the early 1990s. Many airlines, including Northwest, needed employees to take pay cuts as they struggled to survive.

Like most airlines, Northwest has implemented a surcharge on tickets to help mitigate rising fuel prices.

But Northwest officials concede the surcharge does not nearly cover rising fuel prices.

"With fuel at $30 a barrel, it's a small shovel full of earth on a very large whole," said J. Timothy Griffin, executive vice president of marketing and distribution.

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