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Airline Fuel Costs Seen Rising 40 Pct
Reuters
NEW YORK — Airline fuel costs in 2000 could rise 40 percent over 1999, or $4.4 billion, almost as much as the industry made in profits last year, according to an industry association forecast.

On an annualized basis, the Air Transport Association forecast that jet fuel costs will rise to $14.6 billion in 2000 from $10.2 billion in 1999.

In the first quarter, fuel costs have soared to 77 cents a gallon from 44 cents a year earlier, a 75-percent increase. Airline shares have languished as industry executives warned of losses at current fuel levels.

ATA compared the projected $4.4 billion rise in fuel costs to the $4.85 billion net profit the industry earned in 1999.

Fuel is the airline industry's second-largest cost, after labor. Last year, 8.8 percent of revenue was used to pay for jet fuel and that is expected to rise to 12.1 percent this year, ATA said.

Despite better fuel-efficiency, the high costs must mean an increase in ticket costs, said ATA, whose member carriers transport 95 percent of U.S. passenger and cargo traffic.

"Our costs are going up dramatically and airlines have no choice but to pass these increased costs, as much as possible, on to the consumer," ATA Chief Economist David Swierenga said in a statement.

"Passing on increased costs is always difficult for airlines because as prices go up, it makes travel less affordable and reduces demand," Swierenga said.

Fuel prices began an upward climb in the latter part of last year.

According to the ATA forecast, the outlook for fuel costs are as follows:

Quarter Ending 1999 2000 Percentage

(per gallon) Increase

March 44 cents 77 cents 75 percent

June 45 cents 79 cents 76 percent

September 53 cents 69 cents 30 percent

December 64 cents 64 cents 0 percent

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