Oil Prices

Despite windfall from lower fuel prices, airlines boost base fares

DALLAS  – U.S. airlines are raising base fares on many domestic flights even though they are getting a windfall from lower fuel prices.

JetBlue Airways raised fares by $4 per round trip on a small number of routes Thursday, and Delta Air Lines picked up and greatly expanded the breadth of the increase, according to FareCompare.com CEO Rick Seaney and J.P. Morgan analyst Jamie Baker.

The hike got an important boost when Southwest matched it a day later. Other airlines often drop price hikes if they are resisted by Southwest, which carries the most domestic passengers.

A JetBlue spokeswoman confirmed that the airline initiated the increase on its domestic flights. Delta said it had matched and expanded “an industry increase.” United Airlines and American Airlines, which also owns US Airways, confirmed matching the $4 increase.

Higher base fares don’t always result in passengers paying more. Airlines run frequent sales, and they adjust fares on individual flights depending on demand. The last successful broad increase occurred in April.

The increase showed that fear of Ebola hasn’t hurt travel demand, and that airlines have not passed savings from lower fuel prices to consumers, Seaney said.

Oil prices, which show up in the cost of jet fuel, have fallen by about one-fifth since late April. Fuel is the largest expense for most airlines.

The price bumps could ease investors’ concerns that lower fuel prices would be passed along in lower fares, Baker said.

Airline stocks rallied for a third straight day.

–  Shares of American Airlines Group Inc. closed up $1.84, or 5.5 per cent, to $35.22

–  Delta Air Lines Inc. rose $1.65, or 4.8 per cent, to $36.04

–  JetBlue Airways Corp. climbed 37 cents, or 3.4 per cent, to $11.23

–  Southwest Airlines Co. gained $1.79, or 5.8 per cent, to $32.84

–  United Continental Holdings Inc. gained $2.61, or 5.8 per cent, to $47.29


Get travel news right to your inbox!