United Airlines fares hiked by 3% to 5%

29 April, 2008:

United Airlines, the second largest airline in the United States, has hiked nearly all its domestic airfares by 3% to 5% in view of the skyrocketing prices of aviation fuel.

The widespread increase in fare resorted to by the Chicago-based United Airlines is the third in a succession initiated in a span of just over two weeks.

The move by the United Airlines comes just two days after Richard Anderson, chief executive of the United States-based Delta Air Lines Incorporated, said that domestic carriers will have to raise ticket fares by 15% to 20% just to break even at existing fuel prices.

A spokesman of the United Airlines was quoted as saying that the carrier’s latest increase in domestic airfares, which applies everywhere in the United States except to and from Hawaii, is a “a part of our effort to pass on increases in our commodity costs that will help offset the significant and rapid rise in fuel.”

Commenting on the hike in airfares, John Heimlich, chief economist of the Air Transport Association, the trade organisation representing the major airlines in the United States, said,“This is the most challenging financial period in the history of the industry. Just at the same time we have this unprecedented surge in jet fuel prices with no end in sight, we are bumping up against a weakening economy."

Operating costs of airlines have gone up sharply as the price of jet fuel, like gasoline, has soared along with the price of oil.

The Air Transport Association, which had a few months ago predicted that the airline industry would make profits for the third straight year in 2007, is now forecasting a multibillion-dollar loss, added John Heimlich.

According to experts, the 3% increase in fares by United Airlines would affect routes where it is in furious competition with budget airlines such as Southwest Airlines Company, while the 5% increase applies to routes where there is no competition from low-cost carriers.

The new prices announced by United Airlines will raise roundtrip fares by as little as $2 on the cheapest routes, but could increase as much as $90 on some flights, a company spokesman said. For instance, a one-way ticket on the Chicago - Los Angeles route, where United Airlines competes with Southwest Airlines, that used to cost $322, has now been raised to $332.

On a less competitive route such as Philadelphia to Los Angeles, United Airlines’ one-way ticket now costs $766 – up from $758.