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Fri, Mar 25, 2005 - Page 12 News List

Airfares to climb along with fuel prices

MARKET JITTERS US air carriers are rolling back cheap ticket prices to compensate for rising fuel costs after the industry followed Delta's January move to cut fares


Major airlines rushed to join Delta Air Lines when it cut ticket prices by as much as half in early January. The actions ignited a strong demand that shows no signs of letting up as the busy spring and summer travel season approaches.

But the costs for airlines are soaring, especially their jet fuel expense, which they expect will be billions of dollars more this year. With fuel prices up 35 percent through January from last year's record levels, big airlines have decided they cannot afford to keep those bargain basement fares in place.

In the last four weeks, major airlines have instituted three rounds of fare increases, after trying unsuccessfully for more than two years to raise prices to cover rising fuel costs.

The latest increases were put in place this week, when American, Continental, Northwest and even Delta all raised one-way fares by US$5. Even low-fare airlines like Southwest and JetBlue have raised fares, although Southwest's increases have been as little as US$1.

As a result of the collective increases, the average one-way coach fare cost US$98 this week, according to Harrell Associates, an industry consulting firm that tracks airfares.

That compares with US$89 during the week of Jan. 10, after Delta rolled out its SimpliFares program. Under the plan, Delta cut the price of fares by up to 50 percent, eliminated the need for a Saturday night stay, and set limits of US$499 one-way in coach and US$599 one-way in business class. At the time, many airlines matched its fares and eliminated restrictions, but stopped short of similar fare limits, giving themselves some wiggle room.

Big airlines have made sporadic efforts to raise fares since fall 2002, only to see the efforts fail when one company or another, usually Northwest or Continental, refused to go along.

Even though there seems to be solidarity this time, the cuts are still making the companies nervous. Over the last week, the airlines have played something like a game of chicken, putting the increases on, taking them off, until finally deciding to leave them intact.

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