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Deal makers in May devised the merger between US Airways and America West Airlines to be profitable even if crude oil prices climbed as high as $50 a barrel.

Less than three months later, crude has passed $60 -- raising the bar on an already challenging environment for the merger to debut this fall.

"Fuel prices are the dark cloud over everybody in the industry," said Dan Kasper, head of LECG, an airline industry consultant based in Cambridge, Mass. "It's going to be more difficult to make money with crude at $60 than it was at $50."

Analysts don't think jet fuel will sink the new US Airways, which the merger partners hope to launch as early as October. But the new cost benchmark is giving incoming CEO Doug Parker a reality check, and there's little relief in sight.

"It's looking like we're going to have high fuel prices for a while (because) the fuel markets look to be very tight," said Kasper.

That's the prognosis of energy experts. Prices quoted by commodities traders indicate that crude oil will cost between $58.75 and $63.51 per barrel for the next 12 months, according to data from Fimat USA Inc., a global commodities brokerage firm.

That range in crude prices translates into jet fuel costs likely to range between $1.71 a gallon and $1.82 over the next 12 months, said Fimat data.

"If the price of fuel continues to increase, we're hopeful we will be able to manage it on the revenue side, although that has not been the case thus far for America West or any other airline," said Parker, currently America West chairman-CEO, in a recent employee message.

The new US Airways could "be a survivor, even in the world of $60" crude, he said, but it could turn a profit only "if capacity reductions occur" among airlines generally. That means airlines must reduce the number of flights they offer or change to smaller airplanes to reduce total seating.

Yet, those prospects are mixed. Kasper said bankrupt United Airlines cut its capacity 14 percent last month, and Delta Air Lines might reduce capacity by year's end. US Airways and America West themselves plan to shed 60 planes in the coming months.

On the other hand, Southwest Airlines and JetBlue Airways are increasing flights, he said. Those discounters' actions could blunt the fare-pricing power derived from other majors' fewer flying seats.

The merger of US Airways and America West, the nation's seventh- and eighth-largest airlines respectively, would create a coast-to-coast carrier with discount fares. It would rank as the sixth-largest U.S. airline with an estimated $10 billion in annual revenue. Investors have pledged $565 million in capital, plus the new US Airways would begin its operations with $2 billion in cash.

"Fuel prices are the main reason the (merger) financing package US Airways put together is so important because it provides them a real cushion," said Kasper.

How significant is the fuel-cost factor? It was the main culprit behind US Airways Group's red ink last quarter.

The airline last week posted a quarterly loss of $62 million on revenue about the same as last year. But US Airways' outlay for fuel rocketed up $182 million in the past year. Even with a modest fuel increase, the carrier would have made a profit last quarter.

According to US Airways' quarterly report, its average jet-fuel costs soared 57 percent to $1.68 a gallon from an average $1.07 in the same period a year ago.

"Record fuel prices continue to offset the tremendous progress we have made in reducing costs," CEO Bruce Lakefield said in a statement last Friday.

Not only are fuel prices practically beyond US Airways' control but they are traditionally quite volatile. For example, when Saudi King Fahd died on Monday, the news from the oil-rich nation pushed up crude prices by $1 a barrel to a record $62.30.

Traditionally, jet fuel accounts for about 14 percent of an airline's overhead, or $1 of every $7 spent, say analysts. Currently the industry is shelling out more than $1 of every $5 on jet fuel, or 21 percent of their budgets, according to data from the Air Transport Association.

"For many carriers, fuel has gone from the Number 2 cost to Number 1" surpassing labor costs, said John Heimlich, chief economist for the airline industry group, based in Washington, D.C. He estimates the airline industry consumes roughly 19 billion gallons of jet fuel a year.

"So every penny increase in jet fuel adds $190 million more to those costs per year, or about $16 million a month," said Heimlich. "And that's just a penny increase."

Jet fuel prices in the past year, however, have not risen by pennies, but by dimes. Jet fuel cost around $1.16 a gallon in July 2004, according to data from the U.S. Energy Information Administration. It had reached $1.70 a gallon before the end of July, 12 months later.

Major airlines, which lost $33 billion in the last four years, are headed for another $5 billion in losses this year, estimates the General Accountability Office. US Airways and America West don't want their merger to add to the red ink.

"They now have very competitive labor costs. The trick will be to knit the (route) network together to hold down their non-labor costs," said Kasper. "And that will be a challenge."

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