by Bruce Myint | July 01, 2004
In May, some of the nation’s major airlines attempted, but failed, to raise airfares to offset rising fuel costs. Record-high oil prices, experts warn, will bring more such actions.
     Continental Airlines led the recent charge by increasing worldwide fares by up to $40 per roundtrip. The move quickly led to hikes by American and United Airlines. The fares were soon rolled back, however, when other carriers, led by US Airways, failed to match the increases.
     Continental said the hike was an attempt to offset 15 to 20 percent of the airline’s rising fuel costs a growing problem in the industry.
     “Every penny per gallon increase in the price of jet fuel means $180 million to the industry, and what we’re seeing these days is a hell of a lot more than a penny increase,” said John Heimlich, chief economist with the Washington, D.C.-based Air Transport Association. At press time, the price of crude oil was $41.45 a barrel, $10 more than last year’s average.
Airlines, said Heimlich, have resorted to ploys like taxiing with one engine instead of two and lightening loads by ditching inflight magazines and cutlery to maximize fuel use.
     A source at one airline said as long as crude oil prices continue to hover around $40 a barrel, the costs will likely be passed along to customers. “Airlines did so much to reduce costs after 9/11,” said a spokesperson for the ATA. “There’s not much fat left on the bone to trim.”
     Meanwhile, also in May, Southwest Airlines said it planned to keep its recent $1 and $2 increases on flights up to and over 600 miles.
     Tom Parsons, CEO of, who counted nine fare hikes since last December, said smaller cities not served by low-cost carriers will be the most vulnerable to future fare increases.