Southwest Airlines matches other fliers’ fare increases as oil prices soar

DALLAS -- Southwest Airlines Co. has joined a sweeping increase of $10 in the price of many domestic round-trip airfares, citing the need to offset high fuel prices.

Southwest's action 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.

During 2010, the airline flew 15.7 million passengers into or out of McCarran International Airport, 40 percent of the total. Delta was a distant second at 4.1 million.

Also Monday, United Continental Holdings Inc., the world's biggest airline company, scrapped its 2011 growth plans and said it will cut unprofitable routes because of rising fuel prices. The airline also said it may remove less fuel-efficient planes from its fleet.

The airlines say they need the money. "As an industry, we are all feeling the cost pressures surrounding fuel prices," Southwest spokeswoman Ashley Dillon said Monday.

Las Vegas-based Applied Analysis principal Jeremy Aguero said the increase by itself would probably have little impact on the local tourism industry.

"But if there is a sustained increase in price at the current levels, then it would have a negative impact on tourism and travel, there's no question about it," he said.

He defined sustained as gasoline prices staying around $4 per gallon, and the equivalent level for aviation fuel affecting fares, for three months.

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.

And fuel costs are on executives' minds.

"Fuel prices are up every week and the fare increases aren't keeping pace with fuel cost increases," Southwest CEO Gary C. Kelly told The Associated Press.

Kelly said Southwest is on pace to spend $1.3 billion more on fuel this year than last year. That's nearly triple the airline's $459 million net income for 2010, or about $15 per customer.

Kelly doesn't think higher fares are driving away customers. Southwest reported Monday that February traffic, measured in miles flown by paying passengers, jumped 13 percent from the same month last year.

Jet fuel prices have risen more than 50 percent in the past year to more than $3 a gallon, although most airlines have offset some of the increase through hedging -- in effect, 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 AMR Corp.'s 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.

There were 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 became the latest to do that on Monday. Frontier said its second-quarter capacity would be flat, rather than a planned increase of 1.5 percent to 2.5 percent.

Review-Journal writer Tim O'Reiley contributed to this report.