More Fare Hikes Are Likely
Airlines Pressed to Raise Prices to Offset Skyrocketing Fuel Costs
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
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
“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
Tom Parsons, CEO of Bestfares.com, 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.