So, from the looks of a letter that arrived in my in-box last night, most of the airlines' woes come from but a single source: oil speculators. At least, that's what American Airlines' Gerard Arpey and Southwest Airlines' Gary Kelly -- and nine of their fellow CEOs and presidents -- insist in a missive they all signed and sealed with a kiss. "Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation," notes the letter. "However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation."
Echoing stories like this one, they also direct "all airline customers" to head on over to Stop Oil Speculation Now to, um, get involved! (How very Ralph Nader of them. And Congressional.) Looks like the letter's been making the rounds for a couple of days; noted Politico on Wednesday: "Investors are a convenient scapegoat for the airlines, who’ve angered passengers with new fees, poor customer service, fewer flights, and higher prices." --Robert Wilonsky
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An open letter to all airline customers
Last week, crude oil hit an all-time high of $146, and the skyrocketing cost of fuel is impacting our customers, our employees, the communities we serve, and the economy as a whole. United, and the majority of other major U.S. airlines, are asking our most loyal customers to join us in pushing for legislation to add more transparency and disclosure in the oil markets. Please see the attached open letter from the leaders of the U.S. airline industry.
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.
Robert Fornaro Chairman, President and CEO AirTran Airways
Bill Ayer Chairman, President and CEO Alaska Airlines, Inc.
Gerard J. Arpey Chairman, President and CEO American Airlines, Inc.
Lawrence W. Kellner Chairman and CEO Continental Airlines, Inc.
Richard Anderson CEO Delta Air Lines, Inc.
Mark B. Dunkerley President and CEO Hawaiian Airlines, Inc.
Dave Barger CEO JetBlue Airways Corporation
Timothy E. Hoeksema Chairman, President and CEO Midwest Airlines
Douglas M. Steenland President and CEO Northwest Airlines, Inc.
Gary Kelly Chairman and CEO Southwest Airlines Co.
Glenn F. Tilton Chairman, President and CEO United Airlines, Inc.
Douglas Parker Chairman and CEO US Airways Group, Inc.