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American increases fares, citing fuel prices
Hike is biggest of several recent industry-wide moves
NEW YORK - American Airlines sparked a new round of airfare increases Thursday by raising domestic round-trip prices $20, the biggest in a series of hikes U.S. carriers have tried since summer.
The nation’s largest airline said it was trying recover some of the costs associated with the rising price of crude oil and jet fuel. The new fares took effect as the price for a barrel of crude hit yet another record trading high — this time above $96 a barrel.
The latest round of fare hikes is the industry’s seventh since Labor Day, and the largest in dollar terms, said Rick Seaney, chief executive of airline price tracking Web site FareCompare.com FareCompare.com.
“This last two months have been unprecedented, and a lot of it has to do with the unprecedented price of fuel,” he said. “Supply and demand is in favor of the airlines.”
Even with seven increases, though, the rate of inflation on airfares has not kept pace with energy costs. Crude oil is up 25 percent since Labor Day, but jet fuel is up about 13.5 percent and the cheapest type of fares is only up about 5 percent.
Delta Air Lines followed American’s lead with its own increases Thursday. Most routes in the contiguous 48 states were affected, spokeswoman Betsy Talton said.
Other carriers, such as No. 2 United Airlines, said they were studying the move but had not yet decided whether to raise their own prices.
In a separate move, AirTran Airways raised its fares by $5 to $10 one-way Wednesday. Delta also matched that increase.
Major carriers typically follow competitors in raising prices within a matter of days, if not hours, although stiff competition on popular routes mean airlines often repeal some the increases almost as fast as they implement them.
“Some of those fares will be rolled back by Sunday,” said Bob Harrell of travel and aviation consulting firm Harrell Associates.
Airlines have consistently cited increasing fuel prices as justification for the increases, and industrywide efforts to trim capacity have helped some of those fare hikes stick. Fuel is one of the industry’s biggest costs.
The Air Transport Association, the industry’s main trade group, said Thursday that higher fuel prices drove second-quarter costs 5.6 percent higher — more than twice the rate of the Consumer Price Index, which tracks inflation.
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American estimated the increase in the spot price of oil since the summer translates into more than $1 billion in annual costs.
And though the increases in ticket prices have not kept pace with the increases in fuel costs, travelers in some cities are still getting hit hard. Harrell said low-cost leisure fares to and from Boston, for example, were 24 percent higher last week than a year ago, while those in and out of Denver were 36 percent higher.
“There’s is always a story behind why those fares go up. It’s usually because carriers are having sales or not having sales, or because new carriers are entering or leaving the market,” Harrell said. “That’s why it pays to shop around, and why it pays to be patient to get a good fare.”
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