J.P. Morgan analyst Jamie Baker, who tracks fares, said United and US Airways expanded the price increases to routes that Southwest doesn’t fly and included Denver, where Southwest had not raised prices. Rick Seaney, CEO of FareCompare.com, said at midday Thursday that all the largest U.S. airlines had raised fares.
Baker and Seaney said JetBlue took price increases that other airlines limited to a few markets such as Florida and expanded them nationwide last week. Southwest jumped in on Wednesday, they said.
JetBlue spokeswoman Alison Croyle said the airline raised prices by $5 each way on some Florida and West Coast routes last week and expanded the increase to other routes Sunday. Southwest spokeswoman Ashley Dillon said her airline raised prices to match JetBlue and “cover operating costs including the high price of jet fuel.”
Jet fuel accounts for about one-third of an airline’s costs - about the same as labor - and the bill has been rising along with crude oil prices. This week, the spot price for Gulf Coast jet fuel was 12.1 percent higher than a year ago and up 8.5 percent so far in 2012, according to the U.S. Energy Information Administration. That could mean more fare hikes ahead.
“It is pretty clear airlines will continue to try to recoup fuel increases regularly this year, with passengers telling carriers exactly when the price of middle seats has stepped over the line,” said Seaney.
Airlines raised base fares about a dozen times in 2011. But at the same time, they sacrificed revenue by simultaneously running sales to fill seats during slower travel periods or in specific markets. This week, even as it raised base fares, American launched a sale on Miami flights. Many consumers are savvy enough to wait for sales before buying tickets.
As a result of this yo-yo pricing, average fares don’t rise as fast as the number of increases would suggest. The average fare on Southwest, one of the few airlines that discloses such figures, was $140 in late 2011, up 7 percent from a year earlier.
Southwest carries more U.S. passengers than any airline and heavily influences prices that competitors charge on many routes.
In some cases, including several times late last year, other airlines attempted to raise prices but gave up when Southwest refused to go along. Airlines are reluctant to set prices higher than competitors, because many consumers will switch carriers to save just a few dollars.
At times Southwest has hinted that in a weak economy, price increases might drive away customers. But chief financial officer Laura Wright told investors two weeks ago that demand was holding up despite many recent fare increases, including eight last year.
Traffic on some airlines, including industry leader United, fell in January compared with the same month last year. Others, including American, saw more traffic.
Thanks to fare increases, all the major airlines that reported figures said they earned more revenue for every seat flown one mile. That’s a closely watched measure of pricing power in the airline business.