Citing fuel costs, Southwest raises fares

Southwest Airlines Co. has raised fares on more than half its seats by as much as $10 each way, and several competitors matched the increase.

Dallas-based Southwest raised one-way fares by $10 on flights of more than 1,000 miles and as much as $3 on shorter flights. It was Southwest’s second broad increase in three months.

“It’s still about fuel,” spokeswoman Paula Berg said. Oil prices “remain high, and we expect them to stay high. We have to offset our fuel bill.”

Berg said the $10 increase affected one-fourth of its customers and the smaller increases would hit another one-third.

AMR Corp.’s American Airlines, UAL Corp.’s United Airlines, Northwest Airlines Corp., Continental Airlines Inc. and others matched the increases, according to the carriers and experts who track fares.

Southwest built its business by promising low fares, but it has raised prices several times in the last year.

“It is increasingly evident that if we count on higher oil prices, we can count on Southwest to push fares higher,” Jamie Baker, an analyst with JP Morgan, said in a note to clients. “Southwest’s full-court press for higher revenue is a phenomenon we expect to continue for several years given its confluence of rising labor and fuel costs.”

Fare increases can fail if some carriers refuse to go along with the higher prices, but the Southwest increase appeared to be sticking late Monday.

“Given Southwest’s general resistance to fare increases, when it does initiate an increase, the other carriers are happy to join in,” said Neil Bainton of FareCompare.com tracking service.

Chief Executive Gary Kelly has said that Southwest will focus on revenue growth because areas where it can trim spending further are becoming harder to find.

United led most major carriers in raising round-trip fares by as much as $10 on Jan. 12. Large airlines pushed through at least 10 fare increases in 2006. Southwest raised fares six times last year.

Separately, Bear, Stearns & Co. raised its rating on Southwest to “outperform.” Also, oil prices fell more than $2 to $57.81 a barrel Monday, which boosted airline stocks.

Southwest shares rose 62 cents to $15.77.