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Jet Fuel Prices Bring Costly Changes to Airline Customers
Thursday, June 26, 2008
Washington, DC - Today, the House Small Business Committee held a hearing to examine how the air transportation crisis, brought on primarily by rising fuel costs, is damaging the U.S. economy. “Record high oil prices are causing airlines to downsize capacity, eliminate destinations, and raise fares even as demand for their services remains high,” said Ranking Member Steve Chabot (R-OH). “The rise in jet fuel is grounding millions of travelers – many of them small business employees.” Jet fuel is the largest expense for airlines today. This year, passenger and cargo carriers are expected to spend $61 billion on fuel, up from $41 billion last year and $16 billion in 2000. The ripple effects of these increases are translating to higher fares and fees for baggage, seat requests and other amenities. Small businesses consistently rank as one of the hardest-hit sectors when it comes to fluctuating costs, and remain particularly vulnerable to the continuous rise in the cost of air travel and cargo. Terry Segerberg, CEO of Mesa Industries, a small business based in Cincinnati, said that her “customers seek and deserve face to face meetings,” but “it is rapidly becoming cost prohibitive to travel.” As businesses in southwestern Ohio know, the Cincinnati Northern Kentucky International Airport (CVG) has long ranked among the most expensive airports. According to the Department of Transportation, during 2007 CVG’s fares were, on average, 85 percent more expensive than the U.S. average when adjusted for sector length. Presently, Cincinnati is the second-most costly U.S. city to fly from, after Anchorage, Alaska, with an average fare of $532. To alleviate costs, Segerberg said she will fly out of airports up to 100 miles away, but she also told the committee “the core issue for the airlines is the same as it is for Mesa – the impact of the excessive cost of oil” and that the country needs to “utilize [its] oil resources that remain fallow.” A recent rash of polls show the majority of Americans agree with Ms. Segerberg: a Los Angeles Times/Bloomberg poll released Tuesday said 68 percent of those surveyed support increased exploration for oil and gas; three days prior, Fox News issued a poll that had 76 percent of survey respondents in favor of immediately increasing oil drilling in the U.S.; and last week Rasmussen reported that 67 percent of Americans support drilling off the nation’s coasts and 64 percent believe it will lower gas prices. “Authorizing exploration and production in areas like the Outer Continental Shelf and ANWR will keep the cost of oil from rising as quickly and will make us less dependent on foreign oil,” Congressman Chabot said. “It will also give our nation time to develop diversified fuel sources and to implement a balanced energy policy.” ###
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