Citing fuel costs, Southwest raises fares up to $10 one way - - Tulsa, OK - News, Weather, Video and Sports - |

Citing fuel costs, Southwest raises fares up to $10 one way

DALLAS (AP) -- Southwest Airlines Co. led a broad fare hike across the airline industry, raising fares by up to $10 for a one-way ticket as the company seeks to offset an expected $600 million jump in its jet fuel costs.

By late Monday, 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. On Friday night, it boosted rates again over about two-thirds of its network, ranging from $2 on flights up to 400 miles to the $10 increase, to $309, for its most expensive walk-up fares.

Southwest's increase was matched by American Airlines, a unit of AMR Corp.; UAL Corp.'s United Airlines; Delta Air Lines Inc.; Continental Airlines Inc.; Northwest Airlines Corp.; and US Airways Group Inc., according to airline officials.

A spokesman for JetBlue Airways Corp. said the carrier had not raised fares.

Southwest CEO Gary Kelly has described the hedging as a program that will buy time for the airline to prepare for permanently higher-priced fuel.

Southwest guarded against the full brunt of rising fuel costs by purchasing much of its fuel through options at specific prices. But that hedging tactic 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 bought just 15 percent of its fuel on the spot market, where prices were roughly double.

This year, Southwest has options covering just 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 settle at $61.77 a barrel Monday on the New York Mercantile Exchange, helping to send nearly all airline stocks lower.

Jamie Baker, an analyst with J.P. Morgan, said the $10 jump in the maximum 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 demand for travel, which has filled many of their planes to capacity.

Terry Trippler, who runs travel Web site, said Southwest was popular enough with travelers to withstand damage the increases might do to its low-fare image. He also suggested that people buy tickets now for summer travel within the United States
because fares could rise again.

"If you see a domestic fare and you like it, take it now," he said.
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