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THE NEW YORK TIMES <P> - The Tech

Hurricane Causes Fuel Shortages; Airlines Forced to Cancel Flights<P>By Micheline Maynard THE NEW YORK TIMES <P>

Hurricane Causes Fuel Shortages; Airlines Forced to Cancel Flights

By Micheline Maynard
THE NEW YORK TIMES

The airline industry felt the brunt of Hurricane Katrina on Tuesday, with some airports running low on jet fuel and carriers canceling hundreds of flights. Meanwhile, Wall Street feared that the financial problems of the sickest airlines could grow worse.

The industry’s trade group, the Air Transport Association, said the nation’s supply of jet fuel had been cut 13 percent because of damage to refineries on the Gulf Coast.

The association arranged for supplies of jet fuel to be shipped by air tanker to airports in Charlotte, N.C., and Fort Myers and West Palm Beach in Florida, where supplies had dwindled, the group’s chief economist, John Heimlich, said Tuesday.

The group also planned to send jet fuel by tanker truck as well as plane to other airports, Heimlich said. Of particular concern are supplies at two big airports — Hartsfield, serving Atlanta, and Dulles, serving Washington. Both airports generally rely on supplies from refineries in Louisiana and in Memphis.

Complicating matters is the coming Labor Day weekend, which wraps up the summer travel season and is generally the last period of strong travel for the airlines until Thanksgiving. Car travel is also heavy then.

And with gasoline selling for upward of $3 a gallon in some parts of the country, versus $1.88 for jet fuel, Heimlich said the airlines were worried that refineries might choose to produce gasoline rather than jet fuel, which would be less in demand.

On Tuesday, airports serving New Orleans and Gulfport-Biloxi in Mississippi remained closed, while operations at the airport in Jackson, Miss., were curtailed. The Federal Aviation Administration said it expected operations to resume in New Orleans on Wednesday, although it could not predict when Gulfport-Biloxi would reopen.

Despite the reopening, some airlines, like United, canceled flights to New Orleans through Thursday; US Airways canceled flights there through Saturday.

Delta Air Lines said it had canceled as many as 300 flights throughout the South, and AirTran, a low-fare carrier, said it had canceled about 190 since the weekend.

Industry analysts said the cancellations would not hurt the airlines’ finances, since they could accommodate those passengers eventually.

The bigger concern, they said, was another rise in jet fuel prices, already at the highest level in history, up 53 cents a gallon this year. Contracts based on the future price of jet fuel spiked Tuesday; in Los Angeles, usually the most expensive market across the country for jet fuel, the price closed at $2.24 a gallon.

That is a particular worry for Delta, which has warned it could seek bankruptcy protection because of a cash squeeze. The airline has said each rise of a penny in the price of jet fuel costs it $25 million.

With jet fuel prices up 53 cents so far this year, Delta is paying $1.35 billion more for fuel than it anticipated.

Airline shares fell Tuesday. Delta was down 7 cents, to $1.20. Northwest lost 25 cents, to $4.94, and AMR, the parent of American, dropped 71 cents to $12.69.