United, American Levy Surcharge for Fuel, Following Continental

United Airlines and American Airlines, the nation’s two biggest carriers, on Wednesday joined Continental Airlines in tacking a $20 fuel surcharge on round-trip fares for all domestic flights after Jan. 31.

Unlike other fare hikes that are often scuttled when competing air carriers fail to match them, air industry observers said the current increases stand a good chance of sticking even if other big airlines such as No. 3 Delta Air Lines and No. 4 Northwest Airlines balk. As of Wednesday evening, neither carrier nor others such as Southwest, TWA, US Airways and America West had followed suit.

And this fare increase, unlike others, will not show up when consumers are price-shopping by comparing fares among airlines. Instead, the fuel surcharge will be added to the total cost of the ticket at the time of purchase, said industry analyst Terry Trippler, who operates an air travel consumer Web site. “It’s not going to turn up until the very end [of the purchasing process].”

On Wednesday, both Northwest and United advertised round-trip fares between Los Angeles and New York after Feb. 1 at $358, excluding taxes and airport facility fees that range from $6 to $12 at the time of ticketing. But by purchasing the Northwest ticket, the price rises to $374, including all taxes and airport fees, while the United fare jumped to $389, which includes taxes, airport fee and fuel surcharge.

Companies enacting the surcharge say the increase is necessary to balance the higher cost of jet fuel, whose price more than doubled in 1999. “We’ve taken a hard look at rising fuel costs and the impact they’re having on the airline,” United spokesman Matt Triaca said. “We’ve taken this action to offset the cost.”

About 10% to 12% of airlines’ operating costs are spent on fuel.

Triaca dismissed the idea that consumers would see the surcharge as a hidden cost and seek out other airlines without it. “I disagree this is an end run around consumers,” he said. “Educated consumers are taking more than just price into consideration when they travel.”

Among those considerations, he said, were flight schedules, availability and routes. “There are a number of factors involved in purchasing an airline ticket,” he said.

But Tom Parsons, editor of Best Fares consumer magazine, thinks price is still the most important. “Twenty dollars is probably enough money to sway consumers to another airline,” he said.

Yet, according to James Higgins, an airlines analyst with Donaldson, Lufkin & Jenrette, there may soon not be lower fares to turn to. He said its chances are “better than even” that most of the major carriers would also impose the surcharge within the coming days.

Trippler said that airlines embracing the fare hike have no choice but to keep the increase in the short run. Blaming rising fuel costs, he said, would appear disingenuous if the companies were to roll back the surcharges in the next few weeks because of price competition, which last year thwarted a number of fare hike attempts.

A fuel surcharge may be more palatable to passengers than a straight fare increase. Analysts noted that, if the surcharge were instituted as a fare increase, the percentage increase would be remarkably high on some lower priced routes.

“By putting it in the fare, the increase could have been quite high a percentage,” Trippler said.

Rising jet fuel prices have been blamed for sluggish fourth-quarter earnings throughout the airline industry, and although prices were expected to begin dropping late this month, spot prices Wednesday rose 4.4 cents to 96.9 cents a gallon.

“Our fuel today is more than 30% higher than what we had projected our fuel for the year 2000 to cost us,” said John Hotard, a spokesman for American Airlines. “It’s continuing to rise and there is no indication it’s going to be falling any time soon.”

American Airlines’ parent company, AMR Corp., said Wednesday its fourth-quarter profit from operations fell 37% to $105 million, or 69 cents a share.

Of major airlines reporting so far, only United’s parent, UAL Corp., had improved profit in the fourth quarter. That’s mainly because of higher average fares and improved international traffic.

United did not add the surcharge to international flights, Triaca said, because agreements governing international fares would complicate efforts to enact the increase.

Bloomberg News and Reuters were used in compiling this report.