=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2004/05= /21/BUGNG6PFGL1.DTL --------------------------------------------------------------------- Friday, May 21, 2004 (SF Chronicle) A big jump at the big pump/Jet fuel prices are up, and so is the cost of a = plane ticket David Armstrong, Chronicle Staff Writer Americans, riled by high prices at the gas pump, are also being hit by rising air fares as money-losing airlines move quickly to pass along their soaring jet fuel costs to consumers. Prompted by fare increases announced Tuesday by Continental Airlines, United Airlines on Thursday announced that it is matching Continental's price increase on most routes. American Airlines, the world's largest carrier, is matching Continental's price increase on many routes. And leading foreign carriers such as British Airlines, Qantas Airways and Singapore Airlines are raising fares. United, the dominant carrier at San Francisco International Airport, and Houston's Continental both raised fares by $10 each way for flights up to 1, 000 miles and $20 each way for flights over 1,000 miles. Even low-fare kingpin Southwest Airlines said it might have to raise ticket prices, blaming the high cost of jet fuel. Jet fuel, which accounts for up to 15 percent of most airlines' operating expenses, currently sells for $1.17 per gallon, compared with just 76 cents at this time last year and only 60 cents in the boom year of 1999, when the airline industry was flying high financially. The fuel price reflects the rising price of crude oil, which hit $41 per barrel this month, up from $36 last month, an average of $31 for all of 2003 and only $26 in 2002. It's unclear whether the airline fare increases will stick. Typically, o= ne carrier raises its fares and the other airlines decide whether to match. If they all raise prices, the price increase stands. If one or two airlines refuse to go along, however, the move stumbles and fares tumble back to where they were. "We go through a real dance in our industry," said Dan Garton, American's executive vice president. "Right now, with respect to fares, we are in mid-dance. It's too early to tell for sure how it will play out." Momentum is building for an across-the-board fare increase, however. The nation's airlines, still struggling to recover from the effects of t= he economic downturn, the Iraq war, the terrorist attacks of Sept. 11, 2001 and the SARS outbreak in Asia, are losing billions. The spike in jet fuel prices is the latest blow, and a serious one. "Despite some encouraging estimates that traffic levels are likely to return to pre-9/11 levels this summer, sustained high fuel prices have all but wiped out any chance of a profitable year for the industry as a whole," said James May, president and chief executive officer of the Air Transport Association, a trade group for the nation's airlines. In addition, major network carriers such as United, which has been in bankruptcy protection for the past 17 months, and American, which narrowly averted Chapter 11, are losing market share to low-cost carriers like Southwest and JetBlue Airways, which have accustomed travelers to expect to pay less for plane tickets. The airlines, driven by a resurgent demand for travel, have restored many flights they eliminated in the slump of 2001-2003 and are expecting a strong peak travel season. The Travel Industry Association of America has forecast a 3 percent jump in all modes of travel this summer. The nation's airlines averaged nearly 12 percent higher passenger traffic last month than in the slow month of April 2003, according to the Air Transport Association. Ordinarily, that demand would be good news. But the airlines are caught = in a bind, squeezed by low fares on one side and high fuel costs on the other. To compensate for the higher operating costs, a growing number of airlines is shifting to higher fares. The soaring cost of fuel is playing havoc with airlines' attempts to pull themselves out of their three-year tailspin. Southwest, which has remained slightly profitable, is ahead of the flock. The discount carrier hedged oil prices for most of its 2004 fuel purchases at $24 per barrel, well below the current rate of $40 or more. Even so, "I wouldn't rule out the possibility that higher fuel costs cou= ld force us to evaluate the possibility of raising some fares by a dollar or two," Southwest CEO Jim Parker said at the company's annual shareholders' meeting this week in Dallas. United, which has said it expects to exit Chapter 11 by the end of this summer, will shell out $425 million more than it expected to pay for fuel this year, according to company estimates. "If not for fuel prices, I'd be able to say we'd be profitable this quarter," United's chairman and CEO, Glenn Tilton, said in New York on Wednesday. Tilton was once a senior executive at ChevronTexaco Corp. However, unlike Southwest, United has not hedged its fuel purchases. In = an interview with The Chronicle last month, Tilton said it was hard to lock in low-cost fuel supplies because Chapter 11 places restrictions on lines of credit and hedging oil at current high prices "doesn't provide much relief." Sky-high fuel prices notwithstanding, United still expects to leave Chapter 11 by summer's end, United spokesman Stephan Roth said Thursday. For the foreseeable future, all the nation's airlines will have to grapp= le with the ever-higher cost of jet fuel. "We'll be spending $660 million more than last year on fuel," said American's Dan Garton. "We didn't hedge much, because the cost of fuel was already high. Now it's over $40 a barrel. Last year, no one could imagine that high a price." CHART: The price of air fuel Per gallon May 2003: 76=A2 May 2004: $1.17 Source: Air Transport Association Chronicle Graphic E-mail David Armstrong at davidarmstrong@sfchronicle .com. -------------= --------------------------------------------------------- Copyright 2004 SF Chronicle