In an unprecedented step, the chief executive officers of 12 major US airlines have published an open letter to their customers asking for their support in lobbying Congress for curbs on speculation on oil prices.

The carriers, which include all large international airlines from the US, claim that speculators are purchasing 66 percent of all oil future contracts today, up from 21 percent two decades ago, with severe ramifications for all users of oil. To combat this, the airlines are calling for limits on speculation and more rules enforcing disclosure and transparency.

In the first quarter of this year, fuel expenses accounted for 29.4 percent of US airlines' operating expenses, up from 13.8 percent in the first quarter of 2003. In the second quarter, oil prices rose even more sharply, which should drive that share significantly higher, with devastating results on carriers' balance sheets.

Having collectively lost US$3.5 billion bet-ween 2001 and 2005, the US legacy airlines made profits in 2006 and 2007, but this year they are in free-fall again. According to the US Air Transport Association, its members could lose as much as $10 billion this year.

To keep losses in check, airlines have ann-ounced fresh cuts in staff, fleets and schedules. Most of the flying curbs are in excess of five percent. Northwest Airlines said it would trim capacity in the fourth quarter by 8.5-9.5 percent.

The majority of the cutbacks affect older narrow-body aircraft, such as DC-9s, on domestic routes, but international sectors are also increasingly affected. Northwest is scrapping three routes across the Atlantic, and United Airlines decided to postpone the launch of its planned Moscow service. Earlier on, the US Department of Transportation allowed US Airways to delay the launch of its first flights to China.

At the same time all-cargo capacity has dwindled through a combination of cutbacks and carrier woes. Most large operators with freighters across the Pacific - from Northwest, JAL and Nippon Cargo to Korean Air, EVA and China Airlines - have cut back their freighter schedules between Asia and North America. Northwest recently took three of its 13 747-200 freighters out of service and cancelled cargo flights to Guangzhou and Taipei.

Operators of older freighters have been particularly hard hit by the soaring oil price, which has forced some into bankruptcy protection or altogether out of business.

In June alone, four carriers flew into bankruptcy or suspended operations. Tradewinds suspended flights of its 747-200 freighters, while Gemini Air Cargo filed for chapter 11 bankruptcy protection for the second time in two years. Over in Europe, MK Airlines resumed operations after grounding its fleet for some time, but Ocean Airlines ceased flying.

More cargo carriers are struggling. Cargoitalia management recently spent some time refuting rumours that the carrier would follow rival Ocean, and in the US there are question marks over the future for ABX Air and Astar, which are going to lose the DHL business, the generator of the bulk of their revenues to date.

"How many customers are there that want independent air freight capacity?" asked George Hamlin, managing director of aviation consulting firm ACA Associates. He pointed to the demise of Kitty Hawk late last year and failed efforts to launch a new cargo airline along similar lines this spring.

Brandon Fried, executive director of the US Air-forwarders Association, stressed the industry's need for healthy airlines, given declining capacity and a greater need for freighters to carry traffic from unknown shippers who are banned from passenger planes. For the moment, however, he does not see any capacity shortage.

Despite a booming US export market, fuelled to a large extent by the weak dollar, Giorgio Laccona, chief executive officer of forwarder IJS Global, does not see any backlogs or need for more freighters. The recent crash of a 747-200F in Colombia caused temporary backlogs in that market, but elsewhere capacity has been readily accessible, he said.

According to a recently released global air freight forecast from OAG Analytical Services, cargo carriers are facing a weak market for a while yet. It predicts that the slump is likely to continue until 2011. In the near term, the US economy is going to be a millstone around carriers' necks.