Fuel Surge Makes AMR Cut Flights

American Airlines will cancel 15 roundtrips in markets served from its two largest hubs.
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American Airlines

said the continuing surge in the price of jet fuel will force it to temporarily cancel 15 roundtrips in markets served from its two largest hubs, Chicago O'Hare and Dallas-Fort Worth International.

The cancellations will start Oct. 5 and last through Oct. 29. American, a unit of

AMR

(AMR)

, said it will watch fuel prices and evaluate the possibility of restoring service after the cancellations run their course.

American is the nation's biggest carrier and said it will continue making some roundtrip flights in the markets where it's scaling back. Among those markets are some of the nation's largest -- Atlanta, Washington, Houston and Newark, N.J., which serves the New York metropolitan area.

Shares of AMR were gaining 44 cents, or 4%, to $11.19.

The cost of crude oil remains at historically high levels. On Friday it was trading around $66 a barrel. But that understates the hit to airlines, because the additional expense for refining jet kerosene has spiked as a result of refinery outages caused by hurricanes Katrina and Rita.

"Jet fuel prices have been rising even faster than crude oil prices for the last year, but it was the 39 percent rise in jet fuel costs in the last month alone that pushed us to make this decision," Dan Garton, American's executive vice president, said in a press release. "We have made incredible progress in lowering our operational costs for over two years now. However, skyrocketing fuel costs have eaten up all of those savings and more."

American said jet fuel was almost twice as expensive Thursday than in September 2004, well above the rate of crude oil's increase. The cost of a barrel of jet fuel has risen from over $78 at the end of August -- before the hurricanes disrupted production and refining -- to more than $109 a barrel.

Fuel's debilitating run-up was one of the factors

behind the bankruptcies of two other big airlines,

Delta

(DAL) - Get Report

and

Northwest

(NWAC)

, earlier this month. Both filed for Chapter 11 on Sept. 14.

At the same time, and again largely because of soaring fuel costs, American plans to discontinue service between Chicago O'Hare and Nagoya, Japan, at the end of October.