Interesting Letter from Alaska Airlines:

Airlines are asking customers to help curb rise in oil prices

TARGET SPECULATORS: Frequent fliers requested to write Congress.

By HARRY R. WEBER
The Associated Press

Published: July 11th, 2008 01:05 AM
Last Modified: July 11th, 2008 01:41 AM

ATLANTA -- The chief executive officers of a dozen U.S. airlines -- including Alaska Airlines -- beset by record fuel costs that have caused several to cut jobs, reduce capacity and impose higher fees on customers, are now asking for their customers' help to curb the rise of oil prices.

They have co-signed a letter being sent to frequent fliers of their respective carriers, asking customers to contact Congress about the problem of market speculation, which they believe is driving up the price of oil.

"This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers," the letter states. A copy was received by The Associated Press on Wednesday.

Lawmakers have cited the problems high fuel prices cause airlines, trucking companies, farmers and consumers in calling for restrictions on speculative trading.

Northwest Airlines Corp. Chief Executive Douglas Steenland urged lawmakers in June to close loopholes that allow traders to dodge U.S. speculation limits by trading on foreign exchanges or through over-the-counter transactions.

"Our highest priority is to tackle the overall price of fuel which is now 40 percent of our cost pie," Steenland told lawmakers. "Addressing excessive speculation is the most immediate remedy Congress could deliver."

The letter from the airlines acknowledges that oil prices are partly a response to normal market forces, prompting a need for the country 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," the letter says.

The letter says speculators buy up large amounts of oil and then sell it to each other again and again. 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, the letter says.

It adds that regulations established decades ago by Congress to control excessive market speculation have been weakened or removed over the years.

"We need your help," the letter to customers says. "Get more information and contact Congress."

It is signed by the CEOs of Northwest Airlines, AirTran Airways, Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Midwest Airlines, Southwest Airlines, United Airlines and US Airways.

Kevin Healy, senior vice president of marketing and planning for AirTran Airways, a subsidiary of AirTran Holdings Inc., said in an interview that while airlines often band together to address congestion and other issues, the letter is unique since it is a public appeal.

Joseph and Ariela Gonda arrived safely and on time here at Copper Center,
Alaska on July 3rd where they spent the night. This morning, at my recommendation, they are heading southeast to visit Chitina and to obtain the great Willow Lake view of the Wrangell Range. Then they turn around and head off to Anchorage. It was a great visit from the moderator of the Yahoo group "My Cicely."

Today is July 4th. I will be working on a connection of the two model railroads, linking the original CRNW Railway model with the much newer ALCANEX Railway line. I should be able to complete the connection sometime today.

Alaska Air's 2nd-bag fee starts July 1

FAIRBANKS - Passengers on Alaska Airlines now face higher fees for a second bag, pets in the cabin and overweight luggage as the carrier tries to make up for higher fuel costs. Travelers who check a second bag will be charged $25 one-way beginning today. The fee does not apply to flights that start and end in Alaska.

Increased fees for pets in the cabin, overweight bags and unaccompanied minors went into effect May 21.

Shipping rates assessed by Alaska Air Cargo are also going up from 18 to 20 cents per pound. A new policy ensures that future prices will rise proportionally to fuel.

Such fees are popping up throughout the airline industry as fuel costs soar.

This summer American Airlines, US Airways and United Airlines will charge $15 for the first checked bag and $25 for a second.

"We are very concerned about the cost of fuel," Alaska Airlines spokesman Paul McElroy said. "It's at a record level."

The company's first-quarter fuel bill was 50 percent higher than a year ago, he said. With 2007 annual revenue at $2.8 billion, Alaska Airlines expects to pay $1.2 billion for 2008's fuel - almost 43 percent of 2007 revenue.

Agent Ramona Oxendine, a partner at Santa's Vagabond Travel in North Pole, said flying is a necessity for most Alaskans, and high prices or more surcharges aren't likely to cancel trips.

Her clients are rethinking how they will spend money at their destinations or increasing vacation budgets.

She warned that passengers should prepare for additional inconveniences like canceled flights, an end to frequent-flier mile awards and fewer connections as airlines look for more ways to control deficits.

Along with fee increases, Alaska Airlines and Horizon Air are making fleet and route changes to trim fuel use. Less-traveled routes are being sacrificed in favor of more flights connecting high-traffic destinations.

In another effort to save money, Alaska Air Group is one of a handful of companies participating in fuel hedging, a practice that is a bit of a gamble but has saved Alaska Airlines about $350 million during the last five years, McElroy said.

"That has been huge in our ability to limit fare increase," he said. The company hedges half its anticipated fuel and buys the rest at market prices. Hedging involves pre-purchasing at a set price and paying a premium for the contract.

The carrier is speeding up plans to replace its older MD-80 planes with more fuel-efficient Boeing 737s. So far, 19 MD-80s have been retired, and the remaining seven will leave service Aug. 25. A single-plane fleet offers savings in training and maintenance costs and simplifies crew scheduling, McElroy said.

Other changes seem minor but add up to savings, he said. Beverage carts are lighter, less potable water is carried on board, and planes are being retrofitted with "winglets" to decrease drag and increase fuel efficiency by about three percent.

On June 17 Alaska Air Group switched from jet fuel to diesel and terminal power to feed pre-conditioned air and electricity into planes waiting at gates in Seattle.

The carrier expects to roll out the same changes this fall in Anchorage, Los Angeles, San Francisco and Portland. Among the five hubs, the airline expects to save 2.4 million gallons of fuel - worth about $5.5 million - a year, McElroy said.

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