Southwest Among Eight Airlines to Raise Fares

By Bloomberg News

Southwest Airlines Co. has raised its highest one-way ticket price by $10 to $309, prompting seven other U.S. carriers to boost fares by similar amounts to help offset higher fuel prices.

The increase is the largest ever for Dallas-based Southwest, analysts said Monday.

The airline, which established the $299 maximum fare in August 2002, raised other fares between $2 and $4 each way, depending on the length of flight, said Southwest spokesman Ed Stewart.

Southwest, the nation’s largest low-fare carrier, becomes the last major U.S. airline to drop the $299 cap on one-way fares.

“We view it as a positive not only for Southwest but for the airline group,” said Susan Donofrio, a Cathay Financial Inc. analyst in New York who rates Southwest “buy.”"Southwest has gone into a number of business markets that certainly would support this type of fare increase.”

The nation’s largest airlines have lost more than $40 billion since 2000, most recently as jet-fuel prices climbed to records and the number of open seats outpaced demand. A decline in industry capacity since late last year has allowed carriers to boost fares in 2006.

Delta Air Lines Inc. and Northwest Airlines Corp. reduced capacity after filing for bankruptcy in September, FLYi Inc. unit Independence Air stopped flights in January and US Airways Group Inc. dropped some flights after merging with America West Airlines to exit bankruptcy.

AMR Corp.’s American Airlines, UAL Corp.’s United Airlines, Delta, Northwest, Continental Airlines Inc., AirTran Holdings Inc. and US Airways all increased fares over the weekend after Southwest boosted prices late Friday, spokesmen said.

Southwest, the most profitable U.S. airline, said its costs will rise $600 million this year because of higher jet-fuel prices and a decline in the amount of its fuel needs covered by hedges — financial instruments used to reduce price spikes.

“Here’s the problem – fuel, fuel and fuel,” Southwest’s Stewart said. “When you’re looking at a bill that is $600 million more than last year, you have to govern yourself accordingly.”

Southwest expects the $10 fare increase to affect fewer than 10 percent of its customers, he said.

The move marked the airline’s largest fare increase ever, said Jamie Baker, a JP Morgan Securities Inc. analyst, and Terry Trippler, who monitors fares for online travel agent Cheapseats.com.

Southwest also raised ticket prices $4 each way on flights of more than 1,000 miles, $3 each way for flights 401 to 1,000 miles and $2 each way on flights of 400 miles or less.

JetBlue Airways Corp., a low-fare carrier based in New York, increased its top fare to $349 from $299 in August.

Southwest in January increased fares $1 to $3 each way, which is the typical amount by which Southwest boosts prices.

Southwest shares rose 1 cent Monday to close at $17.14 on the New York Stock Exchange. The stock has advanced 21 percent in the past 12 months.