See how long it lasts!

[Hopeful]

Reuters
Airlines Raise Fares to Cover Fuel Costs
Friday February 14, 1:05 pm ET
By David Bailey
CHICAGO (Reuters) - Major U.S. airlines on Friday raised airfares $10 each way effective immediately, in an attempt to counter steep fuel price increases that threaten an already struggling industry.
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Continental Airlines (NYSE:CAL - News) on Friday became the first major U.S. airline to raise fares to cover rising fuel costs. American Airlines, a unit of AMR Corp. (NYSE:AMR - News), quickly matched the increase. It was not immediately clear if other major airlines would do the same.
Fuel is one of the highest and least predictable costs facing airlines. In the past, airlines have added what they called temporary fuel surcharges.
Major U.S. airlines lost more than $11 billion in 2002 following a downturn in travel after the Sept. 11 attacks. UAL Corp.''s (NYSE:UAL - News) United and US Airways (OTC BB:UAWGQ.OB - News) have sought bankruptcy protection and other carriers may follow.
Continental, the No. 5 U.S. air carrier, said the increase applied to all U.S. domestic and international flights. The airline spends more than $1 billion per year on fuel and those costs have risen rapidly with the run-up in crude oil prices.
Although the airline industry is suffering from overcapacity and weak demand, this fare increase is necessary to get Continental back on the path to financial recovery, Houston-based Continental said in a statement.
Airfare-watchers said it was only a matter of time before airlines looked to pass the fuel costs on to passengers. They expect others to match the Continental increase in some way.
It gives carriers no choice but to implement fare increases at a time that traffic is already soft, said Joseph Schwieterman, a transportation expert at DePaul University in Chicago. Other carriers have a strong incentive to match Continental''s increase, including the discount airlines.
Crude oil prices stood at more than $36 per barrel on Friday, though prices have seesawed with each development in the dispute between the United States and Iraq.
You only have to drive by the gas station and see what is happening to fuel prices, said Terry Trippler, airfare advocate at CheapSeats.com. I believe it is justified, though I would prefer a fuel surcharge that could be removed. You can''t expect the airlines to absorb that fuel increase.
U.S. airlines typically hedge some of their exposure to fuel price swings, but that process can be very tricky and not all carriers have access to markets necessary for hedging that exposure because of financial straits.
The dual effects of war-induced travel downturn and a spike in fuel prices could be a recipe for more Chapter 11 filings, Schwieterman said.
Continental on Thursday said it expects to post a significant loss in 2003 because of slack revenue and high fuel costs. It also said that without improvement in the current air travel downturn, the airline will not be able to support its current size or cost structure beyond 2003.

 

[Diversion]

Let's hope Northwest doesn't hold out again. I can't help but wonder what kind of shape the industry would be in if one of those prior attempts at raising fares would have stuck.

An extra $10-20 per seat isn't really that much of a burden for a passenger, but spread out over all the seats, that has a tremendous effect on the bottom line.

I do still think the majors need to do some major restructuring of the business model, not just rely on higher fares, but at least a fare increase will give a little more breathing room while they try to fix themselves.

 

[Hopeful]

Not only Northwest, let's see if Jetblue and Southwest balk. Maybe they pay less for fuel than the other majors!

 

[will fix for food]

[blockquote]
----------------
On 2/14/2003 2:06:37 PM Diversion wrote:

Let's hope Northwest doesn't hold out again. I can't help but wonder what kind of shape the industry would be in if one of those prior attempts at raising fares would have stuck.

An extra $10-20 per seat isn't really that much of a burden for a passenger, but spread out over all the seats, that has a tremendous effect on the bottom line.

I do still think the majors need to do some major restructuring of the business model, not just rely on higher fares, but at least a fare increase will give a little more breathing room while they try to fix themselves.

----------------
[/blockquote]


Didn/t NWA just ask their employees for concessions? If they don/t raise their fares now when they have the chance, the employees will certainly take notice.

 

[LGA Fleet Service]

How long will it last?

Probably already been rescinded.


Two US airlines raise fares, but bid seen failing

By David Bailey

CHICAGO, Feb 14 (Reuters) - Two major U.S. airlines raised airfares $10 each way effective on Friday in an attempt to counter steep fuel price increases that threaten an already struggling industry.

However, other major U.S. airlines chose to study, or review, the increase, making the move likely to fail, analysts said, just as numerous attempts to raise airfares have over the past two years.

"Chances are, in this pricing environment, that it is not going to stick," Blaylock & Partners analyst Ray Neidl said. "They were able to push five or six surcharges through in 2000 when demand was strong, but in this environment it is not likely."

Continental Airlines [CAL.N] launched the bid to raise fares to cover rising fuel costs. American Airlines, a unit of AMR Corp. [AMR.N], said it quickly matched the increase for competitive reasons.

But Northwest Airlines Corp. [NWAC.O] said only that it would study the increase while Delta Air Lines [DAL.N] said it would review the move, putting it in jeopardy.

Northwest, however, raised fares in a handful of obscure local markets, in effect blocking the overall increase
Read that as markets without low fare competition
said Jamie Baker, airline analyst at J.P. Morgan. Ten attempts to increase airfares in the U.S. airline industry failed last year, mostly because of Northwest's opposition, he added.

"We expect Continental and American to rescind their respective increases over the next several hours," Baker added.

Leading U.S. airlines lost more than $11 billion in 2002 following a downturn in travel after the Sept. 11 attacks. UAL Corp.'s [UAL.N] United and US Airways [UAWGQ.OB] have sought bankruptcy protection and other carriers may follow.

Continental, the No. 5 U.S. air carrier, said it needed the increase to get back on a path to financial recovery, conceding that the industry has too much capacity and not enough demand.

Houston-based Continental said it spends more than $1 billion per year on fuel and those costs have risen rapidly with the recent run-up in crude oil prices. On Thursday, Continental said it expected to post a significant loss in 2003.

Crude oil prices stood at more than $36 per barrel on Friday, though prices have seesawed with each development in the dispute between the United States and Iraq.

U.S. airlines typically hedge some of their exposure to fuel price swings, but that process can be very tricky and not all carriers have access to markets necessary for hedging that exposure because of financial straits.

"The dual effects of war-induced travel downturn and a spike in fuel prices could be a recipe for more Chapter 11 filings," said Joseph Schwieterman, a transportation expert at DePaul University in Chicago.

Airlines should have a strong incentive to match Continental's increase despite the soft traffic, he added.

Terry Trippler, airfare advocate at CheapSeats.com, said airlines would be justified in adopting the increase, though he would prefer a fuel surcharge that could be removed.