Wednesday AM March 19th, 2008

Senator Kay Bailey Hutchison discusses national and local economy with Greater Houston Partnership…Wholesale prices rise with increase in energy costs offsetting falling food prices…FAA orders check of maintenance records at all U.S. airlines…

Senator Kay Bailey HutchisonU.S. Senator Kay Bailey Hutchison of Texas delivered an upbeat State of the Senate address to members of the Greater Houston Partnership. Senator Hutchison says she’s aware that energy prices cause a lot of the economic pressures that people are feeling.

“In the long-term, there is so much going on, in this area especially, that would help us with new sources of energy, and that’s what’s going to bring prices down at the pump. Not fully utilizing our own resources is what has caused the price to go up. It’s the big demand and lower supply. So if we can match the supply and the demand, we will be able to bring prices down, and I think Houston is working on doing that. But it will take time.”Ed: “Do you see Anwar, that this might be a good time to bring up Anwar in Congress?” “Well, I definitely support Anwar. Anwar is an area the size of Love Field Airport in an area the size of the state of South Carolina. And you would be drilling in that little bitty area because of the new technology. People who are against Anwar are thinking of old technology where you would have oil wells all over the place. But that’s not the case. It’s a very small drilling area. The people of Alaska want it. If we could drill in in Anwar, we believe it would replace the amount of oil we import from Saudi Arabia every year.

Senator Hutchison says the people of Florida may be changing their minds about more drilling in the eastern part of the Gulf of Mexico.

“Now, we are opening up the eastern part of the Gulf of Mexico—not fully, but we are making inroads there. And I think that we’re beginning to make accommodations with Florida, as well, because they’re seeing that the space between the tip of Florida and Cuba is going to be utilized by China because they have now contracted with Cuba. And they’re going to be slant-hole drilling with the new technology that would take our resources. So I think that Florida is beginning to see that it’d be better for us to be taking those resources in an environmentally safe way so that you wouldn’t have oil spills, rather than perhaps another country like China doing it where they might not have the same environmental standards that we do.”

Senator Hutchison says Houston has been relatively resistant to the nation’s current economic problems, by having a diverse economic base that creates lots of jobs. Besides energy and trade at the Port of Houston, she cites aerospace, alternative energy, biotechnology, nanotechnology and information technology.

Wholesale prices rose again in February as another hefty increase in energy costs offset falling food prices. Outside of food and energy, prices shot up at the fastest pace in 15 months. The Labor Department reports that wholesale prices were up three-tenths of one percent last month, following an even bigger one percent jump in January. Outside of food and energy, the rise was a troubling one-half percent jump. That was the biggest increase for core inflation since a rise of nine-tenths of one percent in November 2006. The big February increase raises concerns that relentless increases in energy costs over the past two years are beginning to spread to other areas of the economy.

States are feeling the economic heat too and are taking a hard look at big cutbacks. They’re looking to take away government health insurance and benefits from millions of Americans already struggling with the souring economy. An Associated Press review of the budgets in all 50 states reveals coverage would be eliminated for hundreds of thousands of poor children, disabled and the elderly. More than ten million people would lose dental care, access to specialists, name-brand prescription drugs or other benefits. About 20 million could see their care jeopardized by further cuts to doctors’ reimbursements. States are also considering cuts in aid to schools and universities, shrinking state workforces and even releasing prisoners before their sentences are completed. Despite the dire conditions, only a handful of states are seriously considering general tax increases.

The Federal Aviation Administration has ordered a check of maintenance records at all U.S. airlines. The FAA has come under fire over missed safety inspections at Dallas-based Southwest Airlines involving possible cracked fuselages. The order applies to maintenance records on older Boeing 737’s. FAA inspectors will make sure airlines have complied with orders to do the type of structural inspections that Southwest missed. The FAA has hit Southwest with a $10.2 million civil penalty for missing the inspections, realizing it–and then continuing to fly those passenger planes. Southwest plans to appeal. The FAA will check compliance with at least ten safety orders, called airworthiness directives, at every airline by March 28th. A full audit covering at least ten percent of all safety directives will be finished by June 30th.

Airlines executives say worries about recession, high fuel prices and tighter credit seem to have cooled the merger fever that gripped the industry a few weeks ago. Executives from Houston-based Continental Airlines and Dallas-based Southwest Airlines said that they’re not working on any obvious deals, but they didn’t rule out anything. The comments came at a JPMorgan conference in New York. Southwest finance chief Laura Wright says “it feels like all the talk about consolidation has lost a lot of steam.” Continental finance chief Jeff Misner says the carrier is more concerned with high oil prices that could add $1.5 billion or more in extra fuel costs. Furthermore, he says that “maybe we’ll throw a recession on top of that, and a weak dollar just to kind of make sure it stays real, real interesting.”

When American Airlines began charging passengers a $2-per-bag fee for its curbside check-in service at Boston’s Logan International Airport, skycaps complained that the fee was seriously eating into their tips. Skycaps, who make most of their pay through tips, say that many travelers are not willing to tip them on top of the $2 charge. A group of skycaps is taking its complaints to federal court this week. Their lawsuit seeks restitution of all tips lost by Skycaps since the fee began three years ago. A spokesman for the Fort Worth-based airline says the company will not comment while the trial is under way. Jury selection has been completed; opening statements are scheduled for Thursday. Many major airlines began imposing baggage fees as part of cost-cutting efforts following a steep decline in airline travel after the September 11th, 2001, terrorist attacks. United, US Airways and Northwest are among the airlines that also charge a baggage fee.

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