WaPo Biz Section Used to Bash Airlines, Boost Grandstanding Libs

Washington Post reporter Sholnn Freeman frontloaded his October 31 business section front page article, "Airfare Surcharges Stay Despite Oil Price Drop," not on examining the valid business reasons for why some airlines retain the fee but in citing a liberal politician seeking to grandstand the issue.:

When oil prices were rising rapidly, many financially-strapped airlines started adding special surcharges to ticket prices to cover the bill. So now that oil prices are falling, are the fees coming off? Not yet.

The lag is drawing complaints from air travelers, consumer watchdogs and a member of Congress. Sen. Robert Menendez (D-N.J.) is sending a letter to U.S. Transportation Secretary Mary E. Peters asking the department to investigate whether the charges "have any basis in reality or if they are being used to mislead travelers, reduce competition and increase fares."

In the letter, Menendez also asks the department to set guidelines so passengers can more easily compare ticket prices.

A few paragraphs later, Freeman cited another critic, George Hobica of Airfarewatchdog.com, "who calls the surcharges a rip-off." It wasn't until after the article jumped to page D2 that Freeman gave any consideration to the economic reasons behind maintaining the fuel surcharge, noting that "[t]he extra fees have provided some breathing room to the strapped industry."

Curiously missing, however, was that nowhere in his article did Freeman explore the role that fuel-purchasing contracts have played in forcing airlines to maintain the surcharge, even though Freeman's colleague Steven Mufson did an excellent job in the October 30 paper laying out how such contracts are pinching cash-strapped airlines (emphases mine):

As oil prices were spiking in July, Southwest Airlines chief executive Gary C. Kelly told a conference that his company was "very well prepared to weather the storm" and "prepared for $4 jet fuel." But it turned out that what Southwest wasn't ready for was $2 jet fuel.

Famous for its ability to play the oil markets to lock in low fuel costs, Southwest made some bad bets in late spring and summer. Now, it's paying a heavy price just when it should be celebrating lower costs. A $189 million loss on fuel contracts put the company in the red for the first time in 17 years.

Southwest isn't alone. Though plunging oil prices have been a silver lining for the ailing economy, many companies are still covering high costs they locked in months or weeks ago.

[...]

Even professional traders have been burned. T. Boone Pickens, whose BP Capital fund lost 33 percent in July and 9 percent in August, lost 21 percent in September. In a recent television interview with Charlie Rose, Pickens said he had lost about $2 billion.

[...]

Airlines have been big losers as declining oil prices have made their oil gambles look bad.

In addition to Southwest, United Airlines' parent company, UAL, booked a $519 million loss on fuel-hedging contracts in the third quarter. The values of the contracts have fallen sharply along with the price of oil.

There were good reasons for airlines' efforts to move aggressively to reduce fuel costs. Fuel expenses supplanted labor as the top cost at airlines in 2006. From that point on, the fate of airline stocks has depended largely on the direction of oil prices, with shares deteriorating badly as oil prices ran up earlier this year.

Oil prices are dropping, benefitting consumers with lower prices at the pump and ultimately to lower fuel costs for airlines, which could improve their profitability. Yet rather than noting the positive side of these developments, Freeman opened his article with an anti-business slant that quickly summoned the populist ire of a liberal senator. Washington Post readers deserve better in the pages of their business section.

Ken Shepherd
Ken Shepherd
Ken Shepherd is the Managing Editor for NewsBusters