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Airlines Boost Fares To Offset Fuel Prices

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By ADAM SCHRECK

The Associated Press

Published: May 23, 2008

NEW YORK - Turns out that new airline checked-bag fee wasn't the end of it.

Airlines ratcheted up the pressure on fliers ahead of the holiday weekend, significantly raising ticket prices to offset the runaway cost of fuel. The three biggest carriers each boosted most domestic fares by up to $60 roundtrip, and budget airline AirTran Airways raised its leisure fares by $30 roundtrip.

UAL Corp.'s United Airlines led the round of increases late Thursday, lifting roundtrip ticket prices by $10 to $60, depending on how far passengers fly and the competition on the route.

Travelers will pay the biggest increase on routes of 750 miles or more, which is less than the distance from New York to Chicago, that low-cost carriers such as Southwest Airlines Co. do not serve.

"It's part of all the work that we're doing to try to offset fuel costs," spokeswoman Robin Urbanski said.

AMR Corp.'s American Airlines, the biggest U.S. carrier, and No. 3 Delta Air Lines Inc. matched the increase Friday.

Separately, AirTran raised leisure ticket prices by $30 and business-class fares by $50 roundtrip. Such a large change is unusual for a budget carrier.

The increases came just days after American said it would begin charging customers $15 to check a single piece of luggage. Representatives from a number of other carriers, many of which already are charging $25 for a second checked bag, said they are considering following suit.

"Everything is under consideration with fuel the way that it is," AirTran Holdings Inc. spokeswoman Cynthia Tinsley-Douglas said.

Airlines have come under intense pressure to boost revenue and cut costs as the cost of fuel has soared. As of Monday, spot prices for jet fuel in New York were up 43 percent from the start of the year, according to the Energy Information Administration.

Chicago-based United has been among the most aggressive carriers in pushing fares and fuel surcharges higher, and its increases are often rapidly matched by competitors. Airlines are prohibited from agreeing to simultaneously raise fares, but nothing prevents them from following a rival's lead.

"Airlines have no choice but to pass on the cost of fuel to consumers and when passengers do begin to push back in significant numbers the airlines have no choice but slash capacity," said Rick Seaney, chief executive of FareCompare.com, in an e-mail. He said this latest round would mark the 16th attempted airfare increase of the year. About 11 of those stuck to some degree.

In another sign of the pressure facing air carriers, Northwest Airlines Corp.'s cargo division said Friday it was raising its fuel surcharges on domestic and some international routes.

Midwest Airlines and Frontier Airlines, meanwhile, became the latest carriers to announce charges for second checked bags Friday. Neither introduced fees to check a single bag.

On Wall Street, airline stocks took a beating as oil prices resumed their climb, with benchmark light, sweet crude rising $1.38 to settle at $132.19 a barrel on the New York Mercantile Exchange.

Shares of UAL, Delta, Northwest and US Airways Group Inc. each hit their lowest points since the carriers emerged from bankruptcy protection, and AirTran shares were trading at their lowest point in more than five years. AMR shares hit a multiyear low Wednesday.

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