Southwest blames fuel for latest fare increase

Southwest Airlines Company is raising fares by US$10 for a round trip, saying it needs the money to offset higher fuel costs.

The move last Friday was the latest in a series of price increases from major United States airlines, most of which are making money after a two-year slump.

"In order to offset higher fuel costs that continue to face the industry, we implemented a modest system-wide fare increase of US$5 one-way," said Southwest spokeswoman Ashley Dillon. She said the company was being "transparent" by increasing fares rather than imposing other fees.

Jet fuel prices have risen about 50 per cent to around US$2.80 per gallon in the past year. Southwest CEO Gary Kelly says fuel is the only worrisome factor in the airline's outlook for 2011.

In 2010, Southwest spent US$3.6 billion on fuel, one-third of its budget and barely behind labour among the Dallas company's largest expenses.

Fortunately for airlines, the higher fuel costs come at a time when they are enjoying more power to raise prices. Passenger planes are flying at record occupancy levels because the airlines have limited new flights while travel demand has picked up.

Sharp raise

The airlines, including South-west, have raised fares on leisure travellers several times since December. They have also twice tried to raise fares even more sharply on high-priced tickets favoured by corporate travellers. One such increase stood, but a second attempt to boost fares by up to US$120 per round trip failed this week when US Airways baulked.

Fare increases can collapse if a major airline refuses to go along because other carriers fear losing customers if their prices are even a few dollars higher.

- AP