Airline industry hurt by high oil costs

Record oil prices drove two developments in the airline industry on Friday, and may have been behind the drop in share prices of the company that owns 75 per cent of Air Canada.

In the U.S., there was a call for controls on energy speculation while an analyst predicted that a huge international aviation show may not produce the usual rash of aircraft orders.

In Washington, a spokesman for the Stop Oil Speculation Now coalition said the U.S. government must act to stop traders working around rules intended to limit speculation in commodities.

"We believe that the fastest way to get oil prices under control in the short term is by reducing reckless and unfair speculation in the futures markets," said James May, president of the Air Transport Association of America, which represents the largest U.S. airlines.

Earlier in the week, the heads of 12 large U.S. airlines wrote an open letter to their customers asking them to join the coalition and push Congress to change the trading rules to cut speculation.

Oil hit a new intraday peak of $147.27 US a barrel Friday before closing at $145.08.

Many U.S. politicians have heard consumer and business concerns about higher energy prices. About 30 bills aimed at tightening restrictions on oil trading have been introduced in Washington.

Meanwhile, analyst Nick Cunningham of Evolution Securities said that "everybody's too nervous to order airplanes" for the Farnborough International Airshow near London, England, next week.

The two leading airliner manufacturers and their customers usually announce many sales at the show, but Airbus and Boeing have both said they expect total orders this year to fall far short of the 2,754 planes they sold in 2007.

Montreal's Bombardier Inc. may use the show to announce whether it's going ahead with its proposed CSeries planes, fuel efficient 110- and 130-seat regional passenger jets.

In trading on the TSX, the Class A shares of ACE Aviation Holdings, parent of Air Canada, fell $1.89 to a new low of $12.21. The 52-week high is $30.23.

With files from Associated Press

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