Steenland seeks more energy regulation

The battered airline industry took its concerns about rising fuel costs to Capitol Hill Monday, urging Congress to address widespread speculation in the energy markets.

Making the case for the industry was Northwest Airlines CEO Doug Steenland, who argued that energy market speculators have pushed oil prices to unprecedented levels and harmed the airlines that saw some recovery in 2007.

U.S. carriers are expected to lose about $10 billion this year because the price of oil has skyrocketed by about $70 a barrel over the past 12 months, Steenland said during testimony before a U.S. House Energy and Commerce Committee panel.

"I cannot overstate the importance to my company and the entire U.S. airline industry of immediate congressional action to halt excessive speculation in oil futures markets," Steenland said.

Specifically, Steenland sought more regulatory power for the Commodity Futures Trading Commission (CFTC), a prohibition on pension funds from investing in energy commodities and law changes that would remove loopholes and increase oversight of speculators.

Steenland testified as chairman of the Air Transport Association, a trade group for major U.S. airlines that has formed a coalition with unions, consumer organizations and business associations that want Congress to address energy speculation.

Committee chairman John Dingell, D-Mich., told Steenland that the airlines had assembled "superb recommendations" for reining in institutional investors.

According to data from the CFTC, speculators represented 37 percent of the activity in the oil futures market in 2000, but that percentage jumped to 71 percent by April of this year, Stupak said. He and Dingell want to differentiate between speculative investors and "physical hedgers," such as airlines that enter energy markets because they want to hedge the price of fuel.

Steenland emphasized that eight carriers have ceased operations since December, and that major airlines, including Northwest, already have announced big capacity cuts.

Fares have risen. More increases are expected in an attempt to offset a greater share of the higher fuel costs. But ticket prices are becoming too high for some leisure travelers, and some business fliers also may decide to stay put, Steenland said.

"When demand comes down, we need to adjust the supply to reflect what that demand is. So, unfortunately, communities will lose service," he said.

Stupak asked Steenland what would happen if oil stabilized at about $140 a barrel.

The Northwest chief executive implored members of Congress to take action on energy market speculation by their August recess.

Delta Air Lines, which wants to acquire Northwest by the end of this year, is reducing its domestic capacity by 13 percent later this year and is cutting about 4,000 jobs through voluntary severance packages. United Airlines indicated Monday it would cut 950 pilot jobs in conjunction with previously announced plans to downsize its fleet by 100 airplanes.

Northwest, which plans to reduce its fourth-quarter flying by 8.5 to 9.5 percent across its mainline domestic and international lineup, has not released any numbers on job reductions.

Smaller airlines also are suffering under the crushing blow of high fuel costs. At Mendota Heights-based Sun Country Airlines, the carrier recently reduced its workforce by about 11 percent and cut executive pay by an average of 10 percent.

On Monday, Sun Country confirmed that its three labor unions, representing pilots, flight attendants and dispatchers, have approved pay cuts of 10 percent.