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Business

Airlines bump prices as gas costs soar

flight prices have climbed as airlines scramble to raise fares to cover increasing fuel costs. Rick Seaney, chief executive of the Web-based FareCompare in Dallas, estimates that travelers are paying an average of $100 more for this month's ticket as compared to January.

flight prices have climbed as airlines scramble to raise fares to cover increasing fuel costs. Rick Seaney, chief executive of the Web-based FareCompare in Dallas, estimates that travelers are paying an average of $100 more for this month's ticket as compared to January.

May 9, 2008

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The same factors pushing gasoline prices to new records almost daily are making air travel more expensive, as airlines pour on the fuel surcharges just in time for the summer travel season.

And with most flights still jammed despite a slowing economy, experts said there's no relief in sight for travelers until the fall, when Americans go back to work and to school and demand for seats drops.

Rick Seaney, chief executive of the Web-based FareCompare in Dallas, said last month that there had been 12 attempts by airlines so far this year to raise fares to cover soaring fuel costs - most of them "successful" because the carriers didn't have to rescind them later because of competition. There were 23 attempts last year, Seaney said, a figure that is most likely to be surpassed by year's end.

"It's crazy," Seaney added.

With fuel-related hikes and other fare increases this year, Seaney estimates, travelers probably are paying an average of $100 more for a ticket this month than they would have in January.

However, the amount depends on the route's level of competition and whether discounters like Southwest and JetBlue can keep prices down.

Darin Lee, an airline consultant and principal in LECG LLC, in Cambridge, Mass., said fuel costs the airlines about the same as gasoline costs consumers: about $3.32 a gallon as of April 15, up from $2.60 at the beginning of this year and $2.07 at this time last year.

"All the carriers are in a position where they have to pass through some of that cost to their passengers or they'll be losing tons of money on each passenger they flew," he said.

Fuel now accounts for about a third of most airlines' costs, Lee said.

"For every $100 on a ticket, probably $30 is going for fuel," he said.

The Air Transport Association, an airline trade group, says every penny increase per gallon adds $195 million to the major airlines' annual fuel expenses, which the group estimates will total $59.5 billion this year.

The U.S. carriers made about $5 billion in profit last year but, even before this year's oil price surge, the association was predicting a decline this year.

For the airlines, things could be worse, Seaney and Lee say the major carriers would be in bigger trouble if they hadn't reduced their capacity - available seats - over the last three years by between 12 and 20 percent, so that planes now rarely fly less than 80 to 85 percent full. Some domestic capacity also has been shifted to more lucrative international service.

Still, said Seaney, "There are times when a plane is full and they still can't make any money on the plane."

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