Several major airlines have increased fares in the past two weeks by as much as $20 each way to offset the soaring cost of jet fuel.
The second fare increase in as many weeks was initiated Thursday by Northwest Airlines Corp. and broadly matched by many of its competitors, including AMR Corp., America West Holdings Corp., Continental Airlines Inc., Delta Air Lines Inc. and Air Canada.
Northwest raised most fares in the United States and Canada by $5 each way for flights shorter than 1,000 miles, and by $10 each way for longer flights. The Eagan, Minn.-based carrier boosted ticket prices by the same amount two weeks ago, and its competitors followed that move, too.
Airline analyst Jamie Baker of J.P. Morgan Chase said Friday that it’s “not enough to negate $55 oil, though encouraging nonetheless given (the) industry’s otherwise uninspiring track record at boosting revenue.”
The financial pain caused by the high cost of oil has been magnified by fierce competition from budget carriers such as Southwest Airlines Co. and JetBlue Airways Corp., whose growth has helped drive down the price of already unprofitably low fares. Neither Southwest nor JetBlue has matched either of the recent fare increases.
Before the latest ticket price increases went into effect, the average one-way price on leisure fares in the 100 busiest routes nationwide was 14 percent lower than a year ago at $93, according to Harrell Associates in New York.
John Heimlich, chief economist of the Air Transport Association, was more cautious in his assessment of the announced fare hikes. “That’s only half the battle,” he said. “It still doesn’t mean customers are going to pay it.”
Northwest spokesman Kurt Ebenhoch said Friday that the fare hikes are an attempt to offset the high price of jet fuel, now averaging $1.56 a gallon the spot market in New York, compared with 97 cents a gallon a year earlier.
In 2004, U.S. carriers spent an estimated $6 billion more for jet fuel, an almost 40 percent increase over 2003.
Ebenhoch said the fare increases do not apply to the carrier’s highest-priced business and leisure fares, and that some markets where it competes with low-cost carriers were also excluded in this latest round.
