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 haveadded surcharges amounting to $20 perround-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 ofthe ticket, whether checked online, over the telephone with theairline or through a travel agent.

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

Big Six Back Increase

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

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

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

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

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

Northwest Latest to Add Surcharge

Northwest Airlines todayjoined the nation’s other large carriers in raising domesticfares 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 majorlow-cost carrier, prices its fares differently than the othercarriers, who lower their fares in markets where they competewith Southwest.

Southwest does not have a fuel surcharge in effect.

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

Jet Fuel Prices Rising

Jet fuel prices have been rising along with the price of crudeoil, 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 injet 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, especiallyfamilies, to secondary airports served by the discount carriers.

For example, when surcharges are included, fares fromWashington’s two airports to San Diego are now nearly double thefares from Southwest’s hub at Baltimore-Washington InternationalAirport.’s Ron Dunsky and The Associated Press contributed to this report.