Southwest Airlines Co. says it's raising ticket prices to offset the high cost of jet fuel. And several other big airlines are following Southwest's lead.
Southwest Airlines Co. says it’s raising ticket prices to offset the high cost of jet fuel. And several other big airlines are following Southwest’s lead.
On Monday, Southwest and its AirTran Airways subsidiary raised fares by between $4 and $10 per round trip, depending on the distance. It’s Southwest’s third increase this year, and spokesman Brad Hawkins said it’s all due to higher fuel costs.
United Airlines, Delta Air Lines, American Airlines, US Airways, Frontier Airlines and Virgin America confirmed that they matched the Southwest increase.
According to government figures, spot prices for jet fuel are up 12 percent so far in 2012 but just 4 percent from a year ago.
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Southwest said this month that because it will pay more than it expected for fuel, it won’t earn a profit for the first three months of the year. The airline also said it had seen a slowdown in passengers booking flights in late February – a trend not reported by other airlines.
J.P. Morgan airline analyst Jamie Baker said the fare increase suggested that Southwest is now more optimistic about travel demand.
Southwest added $2 each way for flights up to 500 miles, $3 each way for flights between 501 and 1,000 miles, and $5 each way to fly more than 1,000 miles.
Analysts surveyed by FactSet expect the Dallas-based airline to post a first-quarter loss of 4 cents per share, or about $36 million, after special items. They expect profits later in the year and full-year adjusted earnings of $490.7 million, or 67 cents per share.
CEO Gary Kelly said last week that the first-quarter outlook was “nothing to despair about” and “no need to panic” because it’s usually the weakest period of the year for airlines. He said that after a lull in late February, bookings “look fine.”
Kelly added that if fuel prices continue to rise, Southwest could be forced to reduce flights. When airlines cut flights, they save money because they don’t burn as much fuel, and they also hope to drive up prices by reducing the supply of seats.
Southwest shares rose 12 cents to close at $8.35.