Southwest Raises Fares to Offset Costs

Southwest Airlines Co. raised its air fares by as much as $10 for a one-way ticket, seeking to offset $600 million in estimated additional fuel costs this year, a spokesman said Monday.

Other big airlines, including Continental Airlines Inc., Northwest Airlines Corp., US Air Group Inc., Delta Air Lines Inc., AMR Corp.’s American Airlines and UAL Corp.’s United Airlines followed Southwest’s fare hike, which occurred late Friday.

Alaska Air Group Inc. said it increased fares for transcontinental flights $10 each way over the weekend, though it said the move was not a direct match of the Southwest hike.

It was the second fare boost this year for Southwest, which has made a name for itself as a low-fare carrier but faces a growing cost burden as it enjoys less protection from contracts that shelter it from higher fuel costs.

“There comes a point where you have to be realistic,” Southwest spokesman Ed Stewart said. “Even the most savvy of analysts would agree that fuel is something we just have to keep an eye on.”

The fare increases ranged from $2 for short-haul flights to $10 for “walk-up” unrestricted fares, Stewart said.

Southwest’s hedges have provided a shield against high fuel prices, enabling it to maintain profitability while raising fares only moderately. Its restraint has acted as a brake on rival airlines.

Those hedges are gradually expiring, though, increasing pressure on Southwest to raise revenue and cut costs.

“Southwest is a carrier flying into significant cost headwinds,” JP Morgan analyst Jamie Baker said. “Each year its fuel hedges roll ever higher, and its labor costs are swimming upstream against a steady downward industry current.”

Southwest shares added 1 cent to $17.14. The stock is up 4.3% year to date.