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Truckers, trains will rebound, but airlines? (The following article by Tim McLaughlin was posted on the St. Louis Post-Dispatch website on August 31.) ST. LOUIS, Mo. --Trains and trucks will be fine. Airlines won't. That was the assessment Tuesday after Hurricane Katrina battered New Orleans, a transportation epicenter, and pushed fuel prices - already a millstone around the neck of several passenger airlines on the brink of bankruptcy - to record levels. Delta Air Lines, many Wall Street analysts predict, will be the next airline to file for Chapter 11 bankruptcy protection, propelled by a final push from Katrina. Delta shares tumbled to $1.20 in Tuesday trading, down 5.5 percent. Even before Katrina hit, some Wall Street analysts anticipated possible bankruptcy filings by Delta, the world's second-largest airline, and by Northwest Airlines and Independence Air after the Labor Day weekend. Sky-high fuel costs have roiled the airline industry, where cutthroat competition has hindered the ability to raise ticket prices. That scenario only got worse when fuel prices surged to a record for a second day. Crude oil for October delivery rose 3.9 percent to $69.81 a barrel on the New York Mercantile Exchange, according to Bloomberg data. That's the highest close since trading began in 1983, Bloomberg News said. Unlike low-cost carrier Southwest Airlines, many airlines didn't or don't have the financial wherewithal to hedge a substantial amount of their future fuel costs. Jet fuel prices are crushing the industry, said John Heimlich, chief economist at the Air Transport Association. The airlines consume 19 billion gallons a year, which means they are paying $16 billion in increased fuel prices this year, the industry group said. That means every penny increase in the price of a gallon of jet fuel adds $190 million to the industry's annual fuel tab. All of this pressure from soaring fuel expenses comes as Delta and Northwest seek pension funding relief from Congress and further concessions from workers. "There definitely may be another airline bankruptcy or two before the bankruptcy laws are tightened on Oct. 17," Ray Neidl, an analyst at Calyon Securities, recently wrote in a research note. Meanwhile, things are not so dire for North America's five big railroads, which all send trains through New Orleans. A.G. Edwards transportation analyst Donald Broughton said the big five - Union Pacific, CSX Corp., Burlington Northern Santa Fe, Norfolk Southern and Canadian National Railway - probably will see their profits hurt in the current quarter because of Katrina's damage. But in the fourth quarter and beyond, he expects an upswing in business for the railroads, as they participate in the recovery and reconstruction of damaged areas, transporting bricks, concrete and mortar. "Railroad track is extremely durable," Broughton said. "Once the water recedes, it will be repaired, and in most cases, rather quickly. ... Is it bad? Yes, but it's also what railroads do." He said the trucking industry also will be in position to participate in reconstruction efforts, because the companies pulled their assets out of harm's way before the hurricane hit. Broughton said New Orleans is similar to St. Louis, because it is one of the few cities that serve as a site of origin and destination for the big railroads, trucking and barges. "It's rare to find the five largest railroads in North America going to the same city," he said. "Usually, only a couple serve a particular city." CSX told customers Tuesday that rail service continues to be suspended from Montgomery, Ala., south and from Chattahoochee, Fla., west to New Orleans. Inspections have begun in the segment between Mobile, Ala., and New Orleans, but reports are incomplete. High water prevents accurate assessment in some areas, especially in and around New Orleans, CSX said in a bulletin. Amtrak, which uses the tracks of freight railroads, said in a bulletin that it had suspended New Orleans passenger service, terminating trains instead in Atlanta, San Antonio and Memphis. Wednesday, August 31, 2005 From BLET
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