U.S. Airline Executives Worry Syria Strike Will Spike Fuel Costs
A United Airlines passenger jet taxis to a runway at San Francisco International Airport in San Francisco, California April 22, 2013. Robert Galbraith / Reuters
Political actions are directly tied to oil prices and the slightest rise in costs could have a damaging impact on airlines’ third-quarter profits.
United Continental Holdings Inc. tumbled the most in 13 months to pace a slide by U.S. airlines as crude prices climbed on speculation that tensions in Syria will disrupt oil supplies.
“If oil goes up, the price of jet fuel goes up immediately after,” Robert McAdoo, an Imperial Capital LLC analyst, said today in a telephone interview. “People are worried that in the short run, airlines’ earnings could be hurt.”
The Bloomberg U.S. Airlines Index fell 5.3 percent at 11:50 a.m. in New York to the lowest level in intraday trading since June 25. United, the world’s largest carrier, slid as much as 8.4 percent, the most in intraday trading since July 2012. All 10 airlines in the gauge declined.
Jet fuel is refined from crude oil and is typically the largest expense for U.S. airlines. West Texas Intermediate crude jumped about 3 percent on concern that the U.S. is nearing a military strike on Syria after accusing President Bashar al- Assad’s government of using chemical weapons on civilians.
Foreign Minister Walid al-Muallem said today that Syria’s defenses will “surprise” the world if the U.S. and its allies take military action. Western powers told the Syrian opposition to expect a strike against Assad’s forces within days, Reuters reported, citing sources who attended a meeting.
WTI for October delivery climbed $2.91, or 2.8 percent, to $108.83 a barrel at 10:26 a.m. on the New York Mercantile Exchange after increasing to $109.09, the highest price since July 19.
With assistance from Moming Zhou in New York. Editors: Ed Dufner and Cecile Daurat.
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