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Airlines Raise Fares to Cover Fuel

Interior of a PlaneAirlines in the US are raising ticket prices again to offset the rising cost of jet fuel. According to FareCompare.com, the trend started on Thursday when JetBlue Airways increased its round-trip airfare by $10. Then on Monday, Southwest Airlines followed the move with a $4 to $10 rise to domestic round-trip fares. The trend has been matched by United Airlines, American Airlines, Frontier Airlines, Delta Air Lines and US Airways.

Government figures show that jet fuel prices are up 12% this year already, while fuel costs are only up 4% compared to last year. Southwest Airlines said earlier this month that, because it will pay more for fuel than anticipated, it won’t earn a profit for the first quarter. The carrier also said there was a slowdown in bookings in late February, which no other airline reported.

Southwest Airlines has increased prices for flights up to 500 miles by $2 each way; between 501 and 1,000 miles by $3 each way; and more than 1,000 miles by $5 each way. The budget carrier says the price hike is to offset jet fuel costs, just like the other two fare increases this year.

Southwest chief executive said last week that the carrier’s outlook for the first quarter wasn’t anything to despair or panic about, as it’s usually the weakest period of the year for the aviation industry. After a slowdown in bookings for late February, bookings appear to be fine. If fuel prices keep rising, the airline may have to reduce flights, he added.

Southwest Airlines has also announced recently that Dayton International Airport is one of the markets it’s planning to launch its branded service in following its merger with AirTran Airways, which the carrier acquired last year. Officials in Dayton worked hard to persuade the airline to stay and say that the carrier will potentially have a major impact on the airport since the discount airline drives large amounts of leisure traffic – particularly among those who wouldn’t normally be able to afford to fly.

Meanwhile, this rise in airfares isn’t likely going to be the last. According to a legislative proposal, the airline security tax could be increased. The Airlines for America (A$A) trade group said last week that the proposal – which would raise the fee from $2.50 per trip segment to $5 each way, despite the number of stops – is shortsighted and disappointing and claimed that it could severely hurt the industry. The increase would raise around $700 million per year.

A4A chief executive Nicholas E. Calio says the government can’t continue putting more taxes on airline passengers, who pay over $60 in taxes on $300 round-trip fares already. This approach will ultimately discourage tourism and business travel, he added.

The trade group’s chief economist, John Heimlich, says that airlines can use the extra money from raising fares on their own to improve services – like adding routes or buying new aircraft. However, higher fares as a result of the government increasing taxes discourages passengers from flying since they don’t get any added benefit from airlines.

 

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