Two of the nation's largest airlines--American and Delta--raised domestic fares yesterday by 3 percent across the board, at least in part to offset rising fuel costs.
American Airlines spokesman Tim Smith said the increase would apply to all domestic business and leisure-class fares. The only exceptions, he said, were special fare sales already in place.
Smith said American raised ticket prices because of "an overall upward pressure on costs, especially fuel prices."
The price increases came a day after oil prices surged to their highest level since the end of the Persian Gulf War as Iraq suspended oil exports and sent oil markets into turmoil. The price of crude oil rose to $27 a barrel on Monday, and analysts said prices could be headed higher.
Iraq signaled yesterday that it would be willing to start pumping oil again if the United Nations extends its oil-for-humanitarian-aid agreement for another six months.
Iraq refused to go along with a proposed two-week extension last weekend, triggering the oil shutoff. The United States had wanted a shorter extension while it attempted to broker a deal that would allow U.N. arms inspections to resume in Iraq. If the aid agreement is extended for an additional six months, Iraq would be allowed to pump another $5.26 billion worth of oil into the market.
For several airlines, the sudden surge in prices had no immediate effect because they hedge their fuel costs through futures investments in the jet-fuel and crude-oil markets, which helps offset the spikes that can often occur in oil prices.
Even with the hedging, however, airline fuel costs have risen five to 10 times as much as the inflation rate in the past year. American's Smith said the airline's fuel costs have risen 15 percent for the year ended in September. Overall inflation rose 2.6 percent during the same period.
Delta officials had no immediate comment on the price increases, which were posted yesterday afternoon. Airline prices are posted three times a day. No other airline had acted by late yesterday afternoon.
Northwest Airlines said it had no plans to match yesterday's fare hikes, but Susan Anthony, a spokeswoman for Continental Airlines, said the Houston-based carrier was "studying" the American and Delta moves.
Anthony said Continental has been hedging its fuel prices "for quite some time now."
US Airways, whose fuel prices rose 33.4 percent from the third quarter of 1998 to the third quarter of this year, would not comment on its fare plans. Neither would United, the nation's largest airline.
American's Smith said the only real certainty about the latest fare action was that "this won't be settled today."
The last industry-wide fare increase was in June. But almost immediately, faced with a slight slowdown in ticket demand, individual airlines began to back away from the increases with fare sales.