Fares Rising Along With Jet-Fuel Costs

Airfares are beginning to creep up as airlines struggle with a steep increase in jet-fuel prices, and analysts warn that the costs could push some carriers to the brink of bankruptcy.

United Airlines raised most advanced-purchase leisure fares $15 to $30 each way this week, and some last-minute ticket prices were raised as much as $50, said analyst Terry Trippler of Cheapseats.com, an online travel site that monitors airfares.

No other carriers have yet matched the increase broadly, but Delta Air Lines, Northwest Airlines and US Airways have raised select prices in some markets, he said. "They're nibbling around the edges," he said.

Fort Worth-based American Airlines has not yet implemented any significant price increases.

"We're studying it," spokesman Tim Smith said.

Trippler expects most airlines to raise fares broadly over the weekend. Jet-fuel prices have risen as much as 20 percent in the days since Hurricane Katrina.

"This is a situation where the airlines have no choice but to raise fares and make them stick," he said.

Fuel is the second-largest expense for airlines, after labor. Fuel prices, which have been rising for the past year, jumped as much as 22 percent after Hurricane Katrina ravaged the Gulf Coast. Much of the domestic jet-fuel supply is processed in the region.

Northwest Airlines executives said late Thursday that they anticipate worse-than-expected financial results for the second half of the year. The rise in fuel costs comes as the airline struggles with a mechanics strike, and it could be facing a bankruptcy filing.

"Time is limited for Northwest," said analyst Jamie Baker of JP Morgan Securities, in a report Friday. He predicted that other carriers, including American and Continental, will also lower their financial guidances for the rest of the year.

Another analyst, Helane Becker of Benchmark Co., suggested that Delta and discount carrier Independence Air could file for Chapter 11 as soon as this weekend.

"I just don't see how they can continue to operate," she said. "It's insane."

Most analysts do not consider American as a bankruptcy candidate, at least in the immediate future, because of the airline's substantial cash reserve and its reduced costs.

Some good news amid the gloom Friday was a strong August traffic report. Traffic was up nearly 4 percent at American Airlines, and planes flew 82 percent full. At Dallas-based Southwest Airlines, traffic rose 14 percent, and planes were 76 percent full, on average.

This summer has been one of the strongest in years for the airlines, with most carriers seeing big jumps in travel.

Copyright 2005 Associated Press

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