THE FUEL NIGHTMARE CONTINUES

TESTCustomwebLP TESTCustomwebLP
By TESTCustomwebLP TESTCustomwebLP April 13, 2011 16:52

THE FUEL NIGHTMARE CONTINUES

“The heart beat of an airline CEO increases and decreases with the price of fuel,” says Tewolde Gebremariam the CEO of Ethiopian Airlines in an interview in the next issue of Airline Economics. “The first thing the CEO of an airline does every morning is to monitor the global fuel price.”

In the interview, Gebremariam also bemoans the impact speculators have on the global oil price, a topic also close to the heart of Tom Hendricks, vice-president of operations and safety at lobbying group Air Transport Association of America (ATA).

At the Aviation Week MRO Americas show in Miami, Hendricks called on US regulators to curb excessive speculation on oil futures while the market was so volatile due to the continuing unrest in North Africa and the Middle East. He stated that the ATA strongly supported the Commodity Futures Trading Commission “efforts to develop and implement meaningful commodity position limits and greater transparency to help muzzle excessive, almost mind-numbing speculation by those who never intend to use the product, but just buy and sell to churn price and profits”.

Reducing excessive speculation on commodity prices is a key feature of the Dodd-Frank Act – a 2000-page strong document that seeks to overhaul the broken financial regulatory environment in the US following the global economic crisis.

In a March speech, Commodity Futures Trading Commissioner Bart Chilton stated that speculative positions accounted for more than one million energy futures equivalent contracts to January 2011. Such numbers, Chilton said, demonstrates the need for the CFTC, as part of the Dodd-Frank act, to curb speculation on raw materials – including oil.

However, the CFTC missed the January deadline to enact such curbs on excessive speculation, which would seek to restrict the number of contracts one firm can hold. The CFTC says it needs more data before it will be able to implement curbs, which agency said it will begin collecting in the third quarter of 2011.

Airlines need help now to meet soaring fuel costs – waiting for regulators to introduce curbs on speculative trading on fuel contracts, which may not have that much of an effect on the market price especially given the tense world environment, is a case of too little, too late for many. US airlines are set to record the highest level of fuel costs for the first quarter. Fuel costs now account for 40% of operating expenses and this is expected to become the norm as demand peaks and supply dwindles. More fuel efficient aircraft are badly needed now, not in five years. The aviation jungle drums are suggesting that Boeing is now considering launching a re-engined 737 aircraft to meet this demand rather than delay and plan for an all-new aircraft launch. In such a fraught environment, it is not surprising.

TESTCustomwebLP TESTCustomwebLP
By TESTCustomwebLP TESTCustomwebLP April 13, 2011 16:52
Write a comment

No Comments

No Comments Yet!

Let me tell You a sad story ! There are no comments yet, but You can be first one to comment this article.

Write a comment

Only <a href="http://www.aviationnews-online.com/wp-login.php?redirect_to=http%3A%2F%2Fwww.aviationnews-online.com%2Feditorial-comment%2Fthe-fuel-nightmare-continues%2F"> registered </a> users can comment.