"Northwest Launches Another Fare Increase"

Friday, March 11, 2005

Northwest Launches Another Fare Increase 
By BRAD FOSS
The Associated Press


Several major airlines have increased fares in the past two weeks by as much
as $20 each way to offset the soaring cost of jet fuel.

The second fare increase in as many weeks was initiated Thursday by
Northwest Airlines Corp. and broadly matched by many of its competitors,
including AMR Corp., America West Holdings Corp., Continental Airlines Inc.,
Delta Air Lines Inc. and Air Canada.

Northwest raised most fares in the United States and Canada by $5 each way
for flights shorter than 1,000 miles, and by $10 each way for longer
flights. The Eagan, Minn.-based carrier boosted ticket prices by the same
amount two weeks ago, and its competitors followed that move, too.

Airline analyst Jamie Baker of J.P. Morgan Chase said Friday that it's "not
enough to negate $55 oil, though encouraging nonetheless given (the)
industry's otherwise uninspiring track record at boosting revenue."

The financial pain caused by the high cost of oil has been magnified by
fierce competition from budget carriers such as Southwest Airlines Co. and
JetBlue Airways Corp., whose growth has helped drive down the price of
already unprofitably low fares. Neither Southwest nor JetBlue has matched
either of the recent fare increases.

Before the latest ticket price increases went into effect, the average
one-way price on leisure fares in the 100 busiest routes nationwide was 14
percent lower than a year ago at $93, according to Harrell Associates in New
York.

John Heimlich, chief economist of the Air Transport Association, was more
cautious in his assessment of the announced fare hikes. "That's only half
the battle," he said. "It still doesn't mean customers are going to pay it."

Northwest spokesman Kurt Ebenhoch said Friday that the fare hikes are an
attempt to offset the high price of jet fuel, now averaging $1.56 a gallon
the spot market in New York, compared with 97 cents a gallon a year earlier.

In 2004, U.S. carriers spent an estimated $6 billion more for jet fuel, an
almost 40 percent increase over 2003.

Ebenhoch said the fare increases do not apply to the carrier's
highest-priced business and leisure fares, and that some markets where it
competes with low-cost carriers were also excluded in this latest round.

Crude oil futures on the New York Mercantile Exchange rose 89 cents Friday
to settle at $54.43 per barrel.

Northwest shares rose 2 cents to close at $7.00 on the Nasdaq Stock Market.
Shares of AMR, parent of American Airlines, fell 7 cents to close at $8.90
on the New York Stock Exchange, where Continental shares fell 1 cent to
$11.64 and Delta shares fell 3 cents to $4.30.


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