Airlines impose $20 fare increase
By Trebor Banstetter
Knight Ridder News Service
FORT WORTH, Texas — Several major carriers increased fares by $20 per roundtrip ticket yesterday to compensate for escalating fuel costs.
Continental Airlines was the first to launch the fare increase. Prices went up $10 each way on all domestic and international tickets. American and US Airways matched the increase later in the day.
Continental officials said the increase was necessary to offset the rising price of jet fuel. Crude oil prices exceeded $36 per barrel yesterday, the most expensive price since Oct. 6, 2000.
Continental spends about $1 billion on fuel annually, according to the airline.
"Although the airline industry is suffering from overcapacity and weak demand, this fare increase is necessary to get Continental back on the path to financial recovery," a spokesman said in a statement. "Even with this increase, airfares today are a bargain by any measure."
Officials with American confirmed that they matched the fare hike, but would not discuss whether fuel costs were behind the move.
This is the third attempt by major airlines to increase fares in the past 60 days, said Tom Parsons, chief executive of Bestfares, a firm in Arlington, Texas, that tracks airline ticket prices. None of the other attempts lasted.
"This could be short-lived," Parsons said. If rivals Delta Air Lines, United Airlines and Northwest Airlines refuse to raise fares during the weekend, American, Continental and US Airways will likely have to retract the fare hike, he said.
Intense fare competition among the major airlines and the presence of low-fare carriers such as Southwest Airlines have pushed ticket prices to the lowest level in decades.
The rising cost of fuel was another factor in the industry's poor financial results during the final quarter of 2002. And analysts predict that a war with Iraq would push prices even higher.
Airlines, with United as the exception, have some protection from swings in fuel prices through price hedging. But that doesn't shield them completely.
Continental executives said Thursday that they would likely post a significant loss this year because of fuel costs and continued low demand for airline tickets. American officials have also warned that 2003 will be a losing year.
American also announced an increase in the fuel surcharge for its cargo division. The airline increased the charge from 4 cents to 6 cents per pound for all domestic cargo shipments, and from 10 cents to 15 cents per kilogram for most international shipments from the United States.
Those changes will go into effect Feb. 24.
