Major U.S. airlines see billion pound loss in 2008

By John Crawley

WASHINGTON (Reuters) - U.S. airlines projected on Tuesday they could lose $10 billion (5.11 billion pounds) in 2008 due to skyrocketing fuel costs, a sum that would almost match the industry's worst-ever year loss in 2002.

James May of the Air Transport Association also told a joint U.S. Senate hearing on speculative trading in the oil markets that up to 200 communities could lose airline service as a result of carrier capacity cuts that are being imposed to save money.

"This nation's economy is inextricably linked to the viability of its air transportation system. If the airlines continue to spiral downward, so will the economy," May said.

Wall Street analysts also are predicting multibillion-dollar losses for big airlines that are spending 50 percent more on fuel this year. Total fuel costs are expected to top $61 billion, the largest expense for airlines.

Shares of U.S. airlines moved broadly higher on Tuesday as global crude prices slipped from record highs. However, shares of United Airlines, a unit of UAL (UAUA.O), were off 2.6 percent to $7 after the company projected its 2008 fuel bill would hit $9.5 billion.

United's disclosure was made as part of May's push in Congress for tougher regulation of oil futures trading. Airlines believe market manipulation and speculation are behind the record run-up in global crude prices although the Bush administration believes recent price spikes are due mainly to supply and demand.

May said quick legislative and regulatory action is needed to maintain a viable airline industry.

"We are asking for Congress to take steps now to totally close the loopholes and make the market more transparent and balanced, to ensure a level playing field for all," May said.