Airlines Raise Fares to Cover Fuel Costs

N E W  Y O R K, Sept. 9, 2000 -- — Responding to the highest fuel costs in the last 10 years, the nation’s top airlines are hiking prices on all domestic fares.

The six major U.S. airlines have added surcharges amounting to $20 per round-trip ticket — the fourth increase this year.

The airlines are calling the increase a fuel surcharge, meaning it does not immediately show up in the posted price of the ticket, whether checked online, over the telephone with the airline or through a travel agent.

The latest increase comes on top of a previous $20 round trip, or $10 each way, surcharge added in January. There have been two regular price hikes since then, which are included in listed fares.

Big Six Back Increase

In one scenario, a round-trip flight from New York to Dallas with one stopover might be listed at $248, but carry up to $62 in fees on top of the posted price, said Tom Parsons, who tracks airline fares for the online travel company Bestfares.com.

That would include a total of $40 in fuel surcharges, plus passenger facility charges added to fund airports and security taxes. “That is really going to tick off a lot of consumers,” Parsons said.

Airlines that have added the new charge include United Airlines, American Airlines, Delta Air Lines, Northwest Airlines, Continental Airlines and US Airways.

With each of the big six airlines matching, “this is a done deal,” said Bob Harrell, a consultant who tracks airline fare moves. “You’re talking about 90 percent of domestic capacity.”

Airline fares are highly competitive and increases by one or more airlines typically collapse if not matched by at least the top five or six carriers.

Northwest Latest to Add Surcharge

Northwest Airlines today joined the nation’s other large carriers in raising domestic fares by adding a surcharge of $20 per round trip.

Continental Airlines posted the higher domestic fares Thursday. By Friday, TWA and the nation’s three largest carriers — United, American and Delta Air Lines — said they would match the increase.

Southwest Airlines, the No. 7 U.S. airline and the major low-cost carrier, prices its fares differently than the other carriers, who lower their fares in markets where they compete with Southwest.

Southwest does not have a fuel surcharge in effect.

In markets where airlines compete with low-cost carriers like Southwest, not only will the surcharge be missing, the prices will be lower, Parsons said.

Jet Fuel Prices Rising

Jet fuel prices have been rising along with the price of crude oil, which reached a 10-year high this month.

Dave Fuscus, spokesman for the Air Transport Association, which represents the major airlines, says that fuel represents 11 percent of airline operating costs, the second highest expense after labor. They have no choice but to pass the spike in fuel prices onto the consumer, he says.

“Airlines are a business with very slim profit margins, around two to six percent ” says Fuscus. “The aviation industry, like other industries and many consumers, is suffering from higher fuel prices. Every time the price of jet fuel goes up a penny, the cost to the industry goes up $170 million annually.”

Fuscus says that rising ticket prices earlier this year did not cut into the demand for airline seats, but he doesn’t discount the possibility that demand could now slacken.

“The surcharge is certainly justified by the enormous run-up in jet fuel costs,” said PaineWebber airline analyst Sam Buttrick. “But that doesn’t mean consumers will continue to book eagerly.”

The additional charge could push more travelers, especially families, to secondary airports served by the discount carriers.

For example, when surcharges are included, fares from Washington’s two airports to San Diego are now nearly double the fares from Southwest’s hub at Baltimore-Washington International Airport.

ABCNEWS.com’s Ron Dunsky and The Associated Press contributed to this report.