Southwest Raises Highest Fares to $309

After more than three years of capping airfares at $299 each way, Southwest Airlines raised prices above that limit, blaming the high price of fuel.

The Dallas-based airline's highest fares are now $309 each way, spokesman Ed Stewart said Monday.

"Here's the problem -- fuel, fuel, fuel," he said. "It was inevitable at some point that we were going to have to take some action."

The cap was raised amid a broad increase in ticket prices of $2 to $10 each way. Southwest increased fares over the weekend. Other airlines, including Fort Worth-based American Airlines, quickly matched the increase.

It was Southwest's largest single price increase, Stewart said. But he said flights from Love Field weren't affected because most are short.

Airline analyst Jamie Baker of JP Morgan Securities called the fare increase "unexpectedly large."

Last year, Southwest was largely protected from the rapid jump in jet-fuel costs because contracts locked in lower prices. But some contracts will expire this year, increasing Southwest's fuel bill by an estimated $600 million in 2006.

Baker said the fare increase is good news for the industry.

"Southwest's continued push for higher fares represents ... components of the industry's continued return to profitability," he wrote in a report Monday.

Southwest capped fares at $299 in August 2002, calling itself the leading low-fare carrier. The price forced most competing airlines to lower fares on those routes.

Southwest continues to face significant challenges this year, Baker said, including higher fuel prices and labor costs. Many competitors, like Delta Air Lines, are cutting costs in bankruptcy.

"Southwest is a carrier flying into significant cost head winds," Baker said. "Each year its fuel hedges roll ever higher, and its labor costs are swimming upstream against a steady downward industry current."

Southwest's stock (ticker: LUV) rose 1 cent Monday to close at $17.14.

Fort Worth Star Telegram


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