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Airlines Raise Fares, Blame Fuel Costs

Tuesday, 27 Mar 2012 | 9:54 AM ET

Southwest Airlines on Monday raised fares by $4 to $10 round trip, depending on mileage, in what it says is an effort to offset rising fuel costs.

Southwest Airlines planes
Getty Images
Southwest Airlines planes

The move follows an airfare hike by JetBlue Airways on Thursday of $10 round trip on most domestic flights. Virgin America over the weekend increased fares by $2 for short one-way flights and $5 for long one-way flights.

Typically, when airlines such as Southwest and JetBlue increase fares, the major legacy carriers follow. Delta Air Lines, US Airways, American Airlines and Frontier Airlines matched within hours. United Airlines did as well, according to Rick Seaney, chief executive officer of FareCompare.com, which closely monitors fare increases.

"Over the past two years, Southwest has been a leader in increasing fares, so this current hike is not an anomaly. I would expect the industry to follow," says William Swelbar, a research engineer at MIT's International Center for Air Transportation.

Ashley Dillon, a spokeswoman for Southwest, says the airline had to raise fares "given the current economic environment where the cost of fuel continues to soar."

However, she says, "Southwest Airlines is still committed to being the low-fare leader. We offer lower fares than our competitors and don't charge bag fees or change fees."

Atlanta and Denver, two cities that were excluded from the last Southwest hike, were included this time, as were markets operated by AirTran Airways, which is merging with Southwest, airline analysts at JPMorgan pointed out.

It's the fifth attempt by airlines so far this year to raise fares. Two have been successful, but only when Southwest was willing to participate. Last year, airlines tried raising fares 22 times. Nine increases stuck.

Analysts say higher jet fuel costs will continue to give airlines the ammunition to boost fares.

"The cost of jet fuel will be the catalyst for fare increases throughout the year," Swelbar says. "As fuel goes higher, so will the cost to consumers."

But George Hobica, founder of Airfarewatchdog.com, which tracks fares, says other factors are at play.

"I think increased demand and lower capacity are driving fare hikes just as much as higher fuel costs," he says. "We've had higher fuel costs than presently, but what we haven't had is so much industry consolidation. That's what's driving this. Fewer competitors."

Even as it raised fares, Southwest was offering travelers a sale through March 29 for discounted travel on Tuesdays and Wednesdays between April 3 and June 27.

"The chaos occurs as airlines try to boost base prices while at the same time tossing out weekly discounts to fill empty middle seats on the slower travel days," Seaney says.

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