Climbing jet fuel prices continue to impede the airline sector's recovery and contribute to another year of red ink, the industry's trade group said Tuesday.

"Record crude oil prices, which are expected to average nearly $70 per barrel this summer, will hamper the industry's widespread efforts to reverse the losses that have plagued the airlines in recent years," John Heimlich, chief economist for the Air Transport Association, said in a prepared statement.

Oil prices were hovering around $68 a barrel as supply concerns and tensions on the international front, namely between the U.S. and Iran, have lifted crude to its highest level in around seven months.

The ATA said the cost of refining crude oil into jet fuel, which is still being affected by the refining-capacity shortages that followed hurricanes Katrina and Rita last year, averaged $14.24 a barrel in the first quarter, four times its 2002 level. The total cost of buying a barrel of crude oil and refining it was $84.81 as of April 7, nearly double the price in January 2004.

Heimlich has projected that the industry will lose about $2 billion this year, after losing roughly $10 billion in 2005. He said he won't consider revising the number before seeing the airlines' first-quarter results.

The carriers will report their first-quarter earnings starting next week.

AMR

(AMR)

, the parent of American Airlines, said Tuesday that it will report on April 19. In a recent report, Merrill Lynch airline analyst Michael Linenberg said he expects company conference calls "to highlight both the improving revenue environment as well as the challenging energy backdrop."

Linenberg believes revenue for the eight largest carriers will rise by 8.5% to $21.7 billion in the quarter, a result of improving ticket prices. But fuel costs will still likely get in the way of the sector as a whole turning a profit, he said.

"Despite the solid revenue gain, we are still expecting a rather large $1.1 billion pretax loss for the quarter due to a 23% increase in fuel expense to $6 billion," he said. "At last year's fuel prices, the industry would have reported a break-even pretax result for this year's March quarter. Nonetheless, the solid revenue performance will at least allow the industry to almost halve last year's $2 billion pretax loss."

Linenberg also forecast a "modest" $500 million pretax profit for the industry in the second quarter, assuming a jet fuel price of $1.90 a gallon. In the first quarter, with crude oil averaging $63.27 a barrel, the average price of jet fuel was $1.85, the ATA said. First-quarter data suggest average prices will be higher this year than in 2005. For 12 days in a row the average price of jet fuel has exceeded $1.90 a gallon, and this past Friday it reached its year-to-date peak of $2.00, the ATA said.

The airline industry's total fuel expense more than doubled from 2003 to 2005, and increased by $10.3 billion from 2004 to 2005 alone, the ATA said.