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News > Companies
Continental Airlines raises U.S. fares
No. 5 airline cites higher fuel costs; Northwest selectively matches it, others take no actions.
February 27, 2004: 12:43 PM EST

NEW YORK (CNN/Money) - Continental Airlines Inc., the nation's fifth largest commercial carrier, said Friday it increased fares on domestic tickets to offset higher fuel costs.

Houston-based Continental (CAL: down $0.11 to $14.75, Research, Estimates) said it raised fares $5 on one-way tickets and $10 on round-trip tickets. It said the increases apply to restricted and unrestricted fares.

"Fuel prices -- which we can't control -- are the highest we have ever seen," Continental Chief Financial Officer Jeff Misner said in a statement. "This fare increase is a step toward matching fares with the cost of providing air travel in this environment," said Misner.

Spot crude oil is trading at more than $35 per barrel and jet fuel has been trading at about $1.02 to $1.25 per gallon. Prompt crude peaked at $36.37 on Jan. 20, the highest price since March, just prior to the war in Iraq.

Tom Parsons, president of, said that it's too soon to say if this attempt at raising fares will stick. "We'll have to sit back and wait. We probably won't know the answer until Sunday or Monday," he said.

Northwest Airlines (NWAC: down $0.15 to $10.75, Research, Estimates) said it has "selectively matched" the fare hike, saying the increase will only be applied on some selected routes.

But American Airlines, United Airlines and Delta Air Lines (DAL: down $0.13 to $9.02, Research, Estimates) told CNN/Money that they have not taken any actions to match Continental's price increase.

Meanwhile, low-fare airline such as Southwest Airlines said it will not be increasing ticket prices.

"Absolutely no," said Ed Stewart, spokesperson for Southwest (LUV: down $0.19 to $13.92, Research, Estimates). "We can't be a low-fare airline if we do something like that."

JetBlue Airways Corporation
Delta Air Lines
AMR Corporation
Southwest Airlines Company

According to Parsons, if Continental's rate increase sticks, it will likely hold only on routes not served by one of the major low-fare carriers such as Southwest, JetBlue Airways (JBLU: Research, Estimates) or AirTran Airways.

American Airlines is owned by AMR Corp. (AMR: up $0.10 to $15.45, Research, Estimates), while UAL Corp. is the parent of United.

It was not immediately clear whether other carriers would match the price increase. When other airlines fail to match in competing markets, generally the company that initiated the increase will reverse the decision.

Fuel is the second-largest expense for an airline behind labor costs. While many U.S. airlines were waiting for prices to come down late last year and hence provide hedging opportunities, they never did. Hedging involves the use of futures, options and other derivative instruments to lock in favorable prices.

As a result, few U.S. airlines are hedged in any significant way throughout most of 2004, with the exception of Southwest Airlines.  Top of page

-- from staff and wire reports

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