Higher Jet Fuel View Bolsters Southwest Air, JetBlue

Merrill Lynch raised the underlying oil price assumption for its industry jet fuel forecast for 2005 to $45 per barrel of West Texas Intermediate from $40. Merrill cut earnings forecasts on nine out of the 18 carriers it covers, and now sees the industry's pretax 2005 loss at $3.4 billion, compared with its earlier view for a pretax loss of $1 billion. The research firm said, 'High oil prices will accelerate an industry restructuring that is long overdue. Some carriers will be forced to retrench further and some may even go out of business.' Merrill said 'financially formidable' low-cost carriers such as 'buy'-rated Southwest Airlines (nyse: LUV - news - people ) and JetBlue Airways (nasdaq: JBLU - news - people ) 'are best positioned to capitalize on the potential opportunities that arise from the industry disruption.' Although the firm doesn't rate any major network carriers higher than 'neutral,' Merrill said AMR (nyse: AMR - news - people ), Continental Airlines (nyse: CAL - news - people ) and Northwest Airlines (nasdaq: NWAC - news - people ) 'are best positioned to 'weather' the industry storm.' "