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Airlines raise fares, blame oil price spike

United leads the way in hiking ticket prices and is quickly matched by several rivals.

By Times wires
Published January 5, 2008

NEW YORK - As if on cue, airlines are responding to oil's latest surge by pushing ticket prices even higher.

Round-trip domestic fares began rising $10 to $20 late Thursday, as crude futures crossed the once-unthinkable $100-a-barrel mark. Several major carriers increased prices, with each citing higher fuel costs as the reason.

The widespread increases follow nearly two dozen attempted systemwide fare hikes in 2007, or about double the number during the previous year, according to data compiled by FareCompare.com, which tracks airfare changes.

Passengers hoping for relief in the new year are likely to be disappointed.

"If oil stays at $100 a barrel, or if it creeps up even higher, I don't see how this is going to stop," said Rick Seaney, FareCompare's chief executive. "Airlines are going to be scraping to keep their heads above water."

United Airlines, the second-largest U.S. carrier, led with the biggest round of increases Thursday night.

Tickets on short flights will cost $5 more one-way, while trips of more than 1,500 miles - such as Chicago to Las Vegas or Boston to Denver - will cost travelers $10 more one-way, spokeswoman Robin Urbanski said.

Delta Air Lines Inc. and AMR Corp.'s American Airlines followed United's lead, matching the increase Friday.

Northwest Airlines Corp. and US Airways Group Inc. said they were studying whether to adopt the increase, and Continental Airlines Inc. said it hadn't raised fares. Airlines often drop price changes that aren't matched by rivals.

Days before Christmas, UAL Corp.'s United doubled a $5 fuel surcharge it added a month earlier, effectively raising round-trip fares by $10. Urbanski said that surcharge remains in place in markets where it was matched by competitors.

Urbanski acknowledged fares in and out of some cities are higher than they used to be, but "are still relatively lower than a few years ago given that fuel is our highest expense."

Air Canada raised prices on tickets between the United States and Canada by 2 percent, spokesman John Reber said. That means a ticket booked on Travelocity.com to fly between New York and Vancouver this Sunday and return Monday would cost about $30 extra.

Separately, AirTran Holdings Inc. doubled its one-way fuel surcharge to $10, spokeswoman Judy Graham-Weaver said. FareCompare data indicated Midwest Airlines has also added a surcharge this week, raising round-trip ticket prices by $10, but a spokesman for the carrier declined to comment on the matter.

"We all are facing ever increasing fuel costs and trying to keep up," AirTran's Graham-Weaver said.

The increases come as crude prices hover near all-time highs. On Friday, light, sweet crude for February delivery fell $1.27 to settle at $97.91 a barrel on the New York Mercantile Exchange.

The Air Transport Association said higher fuel costs will likely limit U.S. airlines' profits to between $3.5-billion and $4.5-billion this year, down from an estimate of $5-billion last year. From the beginning to the end of 2007, crude prices surged by nearly $35 a barrel.

"Rising oil prices have a disproportionately negative impact on U.S. carriers, since oil is traded in dollars," ATA Chief Economist John Heimlich wrote in an e-mail. "Foreign carriers generally have more robust hedge positions than U.S. carriers, leaving them less exposed to the soaring oil prices."

Taking off

United Airlines
Increased one-way ticket prices by $5 to $10, depending upon length of flight.
Delta Air Lines
Matched United's increase on Friday, raising round-trip ticket prices by $10 to $20.
American Airlines
Like Delta, it matched United's increase, adding another $10 to $20 to round-trip prices.
AirTran Airways
Doubled its one-way fuel surcharge to $10.
Air Canada
Raised the price of tickets for travel between Canada and the United States by 2 percent.

[Last modified January 4, 2008, 22:47:39]