Severe airline losses forecast

U.S. airlines may lose as much as $13 billion in 2008 as surging fuel prices outpace fare increases, the chief of the Air Transport Assn. told a Senate committee Tuesday.

This year’s financial results will be “on par” with the industry’s worst ever as carriers’ combined fuel costs reach $61 billion, the association’s chief executive, James May, said. The record loss is $11 billion in 2002, the group said.

“I don’t think anybody predicted this extraordinary jump in prices,” said May, whose group represents the biggest U.S. carriers.

The updated forecast came as airlines announced more cuts Tuesday. Northwest Airlines said it would cut its capacity later this year by 3% to 4% and trim its workforce because of high fuel prices. Northwest says it has not yet finalized the number of positions it wants to eliminate.

“In response to these extraordinary fuel costs, we are taking prudent actions to reduce our capacity and right-size,” CEO Doug Steenland said. “This will allow us to better match our capacity to customer demand as airfares, by necessity, must increase.”

Air Canada said separately it would cut up to 2,000 jobs and reduce capacity 7%.

United Airlines earlier projected its 2008 fuel bill would hit $9.5 billion, more than $3.5 billion higher than 2007.