By late Monday (13 March), most other major U.S. airlines had matched the move by Southwest, which over the years has used lower fares to bludgeon the established carriers.
The Dallas-based airline also raised fares in January. Late Friday it boosted rates again over about two-thirds of its network, ranging from $2 on flights up to 400 miles to $10 for its most expensive walk-up fares, which rose to $309.The increase was matched by American Airlines; United Airlines; Delta Air Lines Inc.; Continental Airlines Inc.; Northwest Airlines ; and US Airways Group Inc., according to airline officials.
A spokesman for JetBlue Airways Corp. said the carrier had not raised fares.
Southwest guarded against the full brunt of rising fuel costs by purchasing much of its fuel through options at specific prices. Chief Executive Gary Kelly has described the hedging as a program that will buy time for the airline to prepare for permanently higher-priced fuel.
But hedging is becoming less effective because oil prices have remained expensive.
For example, last year Southwest bought about 85 percent of its fuel at the equivalent of $26 a barrel for oil. The airline purchased just 15 percent of its fuel on the spot market, where prices were roughly double.
This year, Southwest has options covering 70 percent of its fuel, and at the higher price of $36 a barrel. Those percentages keep falling, and the price of the options keeps rising, into 2009.
"We have some protection, but it's not 100 percent," said Southwest spokesman Ed Stewart. "This year, the fuel bill is going to come in $600 million more than 2005."
Crude oil for April delivery surged $1.81 to $61.77 a barrel Monday on the New York Mercantile Exchange, helping send nearly all airline stocks lower.
Jamie Baker, a JPMorgan analyst, said the $10 jump in the highest one-way fare was Southwest's largest increase ever.
"Southwest is a carrier flying into significant cost headwinds," Baker said in a note to investors. "Each year its fuel hedges roll ever higher, and its labor costs are swimming upstream against a steady downward industry current."
Southwest is the only consistently profitable major U.S. carrier, earning $548 million last year. High fuel costs have kept Southwest and other carriers from enjoying the full benefit of strong travel demand, which has filled many of their planes to capacity.
Terry Trippler, who runs travel Web site Cheapseats.com, said Southwest was popular enough with travelers to withstand damage the increases might do to its low-fare image.
Chicago Tribune
Southwest
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