Southwest joins other U.S. airlines in raising fares

 

Discount air carrier  and market leader Southwest Airlines Co. boosted ticket prices over the weekend, virtually locking in higher fares across the industry.

Southwest executives cited the need to offset a 50 percent spike in fuel prices in increasing domestic round-trip airfares by $10, which may have ensured success for a price hike by major airlines that seemed to be faltering. Southwest carries more U.S. passengers than any airline and wields great influence over prices.

It’s the sixth time airlines have raised fares already this year. FareCompare.com CEO Rick Seaney says leisure travelers may now have to pay $260 for a ticket that cost $200 back on Jan. 1.

Jet fuel prices have risen in the past year from around $2 a gallon to more than $3, although most airlines have offset some of the increase through hedging—paying extra to lock in the top price they’ll pay for some of their fuel.

The latest price increase started early last week. Delta Air Lines Co. tried to raise many fares by up to $20 per round trip, but other big airlines sided with a $10 increase started by American Airlines.

Southwest waited three days before matching American’s move on Friday night. Other airlines had rolled back fare hikes on routes where they compete with Southwest and other discount carriers, but they revived the full increase once Southwest raised prices too, Seaney said.

Low-cost airlines JetBlue, AirTran, and Virgin America also raised prices, virtually assuring that the increase will become permanent, he said.

Travelers saw only four broad price increases in all of 2010, and two of those occurred in December. The flurry of fare hikes so far this year mirrors the rapid rise in fares and fuel surcharges in early 2008, when oil prices were heading toward record levels. Oil prices have soared in the past three weeks, approaching $107 a barrel on Monday, because of unrest in the Middle East.

Some airlines have also been dialing back 2011 growth plans because of high oil prices. Frontier Airlines said Monday that its second-quarter capacity would be flat, rather than a planned increase of 1.5 percent to 2.5 percent.