February 13, 2011 in Business

As airfares rise, another charge to think about

Samantha Bomkamp Associated Press
 

NEW YORK — The rising cost of flying comes with a familiar refrain: The airlines need help paying their fuel bills.

For the first time since late 2008, U.S. airlines are adding fuel surcharges to ticket prices. They’ve already raised fares five times since December to offset a 25 percent increase in the price of jet fuel. For those with spring and summer travel plans, it’s a one-two punch.

Right now, the surcharges on U.S. routes are only between $3 and $5 each way. Back in 2008, surcharges started slightly higher, then jumped as high as $60 when oil hit $147 in the summer. Many estimates have oil moving slightly above $100 this year. Even a one-way $15 surcharge adds more than 4 percent to the average domestic ticket price of about $340. And on international flights, fuel surcharges at their peak can more than double the price of a ticket.

American Airlines has just added a fuel surcharge of about $5 each way on most U.S. routes. United and Continental applied a charge of $3 each way. Others are expected to follow.

Besides raising fares systemwide, individual airlines are hiking fares further on popular routes. That helps boost revenue, but airlines aren’t sure it’s enough. Airlines generally expect to pay at least 15 to 25 percent more for fuel this year. Estimates vary because carriers use different financial strategies for rising fuel prices. Oil topped $92 per barrel last week, the highest level since October 2008.

Fuel surcharges are traditionally an easier way to raise fares. An increase to a base fare isn’t always tolerated by customers. They can switch to a rival or force an airline to lower fares again to keep them. Fees are complicated and can drive passengers away, too.

Airlines also believe passengers are more forgiving of price increases for specific reasons.

“I think our customer understands fuel surcharges because they see their energy costs rising as well,” JetBlue CEO and President Dave Barger said in an interview with the Associated Press.

© Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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