Airfares are going up again, but not fast enough for most big airlines to cover their rising fuel expenses.
Even top discounter Southwest luv, which reported a profit Thursday on the strength of its successful fuel-hedging program, raised its fares for the second time this year.
American amr, Delta dal, Continental cal and Northwest nwa raised their fuel surcharges on domestic round trips by $10 to $20, matching a move by United Airlines uaua Wednesday. US Airways will likely match them before the weekend's over, says Tom Parsons of Bestfares.com.
This week's fuel surcharge increase is the 13th effort by the big full-service network airlines to raise prices since Jan. 1, Parsons said. Eight of the previous efforts succeeded. Just last week the full-service network carriers tacked on $10 to fares on routes under 500 miles in length, $20 on routes under 1,500 miles, and $30 on longer routes. So far this year, prices have risen $170 round-trip on certain trans-continental routes, Parsons said, citing one example. If they stick, the fuel surcharge increases announced this week would be on top of that.
Most of those price increases haven't affected passengers on routes also served by discounters such as Southwest. Those carriers have been more reluctant to raise prices.
Now, though, even Southwest is responding to the pressure of soaring fuel prices. On Thursday it raised its fares for the second time in a week after not raising them at all during the first quarter. CEO Gary Kelly, in a conference call with analysts and reporters, warned that even with its latest $3 to $10 fare increase, Southwest's revenue isn't covering its costs.
"We'll have to be looking for opportunities to do more" to raise prices, he said. "You've got a slowing economy and surging commodity prices. That's a pretty deadly combination. The $64,000 question is how much of the increase in our operating costs can the industry pass through to our customers?"
Oil closed Thursday at $114.86 a barrel on the New York Mercantile Exchange. Meanwhile, jet fuel this week is selling for more than $3.40 a gallon, vs. prices of around $1.25 a gallon 12 months ago.
Southwest earned $34 million, or 5 cents a share, in the quarter ended March 31. But it stayed in the black for the 68th-consecutive quarter only because its industry-leading fuel-hedging program produced $302 million in gains in the period. Southwest's oil hedges will allow it to pay a price equal to crude oil at $51 a barrel for 70% of the fuel its planes will burn this year.
Southwest is expected to be the only large U.S. carrier to report a first-quarter profit. Houston-based Continental said Thursday that it lost $80 million, or 81 cents a share, in the first quarter. On Wednesday AMR, parent of No. 1 American Airlines, said it lost $328 million. Most other big carriers are expected to detail their first-quarter results next week.