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Air fares follow gas prices up, to the irritation of major users

By TOM BELDEN Knight Ridder

Recent sharp increases in the price of oil are rippling through the cost of travel. Motorists can see that clearly each time they fill their gas tanks.

But the way airline customers have been walloped by higher fuel prices deserves a special look. Airlines, knowing people either must travel for business or want to travel for pleasure, are using fuel costs as an excuse for what some industry observers see as another grab for money from those already paying record-high fares.

Continental Airlines started the most recent round of price increases, adding a $20 round-trip "fuel surcharge" to the price of most of its tickets. Most other airlines immediately fell in line behind Continental. US Airways first said it would add the $20 fuel surcharge, then said it wouldn't, and then put it only on lower-priced leisure fares.

Low-fare leader Southwest Airlines raised all its fares $4 to $8 round-trip, depending on the length of the trip. On routes on which US Airways competes with Southwest, it matched the $4 to $8 fare increases but didn't apply the surcharge.

The airlines say their costs of jet fuel soared in the fourth quarter, from a 9 percent increase for Delta Air Lines to a 71 percent increase for Southwest, compared with the last three months of 1998. Several airlines say they lost money, or just broke even, in the fourth quarter, largely because of higher fuel prices.

The airlines didn't have much that was specific to say about the surcharges. The major carriers, with the exception of Southwest, were sued by the federal government a few years ago for allegedly colluding to fix prices. Travel agents sued the same airlines again in 1995 for marching in lockstep when they reduced the agents' commission.

Since then, the carriers have routinely refused to comment on their pricing practices.

The idea of passing along higher fuel costs to customers isn't novel, of course. Anyone who drives a car expects gasoline costs to go up when the wholesale price of a barrel of oil rises.

But you may recall that, a year or two ago, when crude-oil prices were low, you were paying one-fourth to one-third less for gasoline when you filled up your car.

Airlines also enjoyed the benefits of low oil prices, yet were able to raise fares in response to strong demand. Some airline customers are annoyed that airlines raised fares even when fuel costs were low, and now are using fuel price increases as an excuse to raise them again.

Adding to the annoyance is the fact that the fuel surcharge may not be immediately apparent when travelers research fares on the Internet, or when airlines advertise prices. You'll only realize a ticket costs another $20 round-trip when you're quoted a final number.

Increasingly, airlines don't include taxes, either, when they advertise fares; they show up only as a footnote. So now, the customer has to ask if a quoted fare not only includes taxes but all surcharges as well.

Travel agents also could be hurt by the fuel surcharge. The agents have to collect it, but won't be paid a commission on it because it's not part of the fare.

While the airlines don't want to talk about their pricing policies, some of their customers had plenty to say on the subject.

In a letter sent Jan. 24, Kevin Mitchell, chairman of the Business Travel Coalition, an advocacy group in Lafayette Hill, Pa., asked Secretary of Transportation Rodney Slater to consider the airline action as one more piece of evidence that healthy levels of competition are sorely lacking within the airline industry.

For the dozen large companies that belong to his coalition, Mitchell said, the surcharge will mean cost increases ranging from $400,000 to $3 million a year. Black & Decker, for example, estimates it will pay $500,000 more.

Those same companies, and many others with a large volume of air travel, have negotiated discount fares for their employees. But most contracts between airlines and the corporations don't include provisions for adjusting prices when fuel costs increase, Mitchell said.

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