Northwest adds $10 surcharge, after all

Airline had blocked rivals' similar boost

February 21, 2003|By BLOOMBERG NEWS

ST. PAUL, Minn. - Northwest Airlines Corp., the fourth-largest U.S. carrier, added $10 each way to all its discounted fares yesterday because of rising fuel prices, less than a week after blocking a similar increase by its rivals.

The move applies to discounted business and leisure fares worldwide, Northwest said. AMR Corp.'s American Airlines, UAL Corp.'s United Airlines and US Airways Group Inc. said they hadn't matched the increase. Delta Air Lines Inc. and Continental Airlines Inc. didn't immediately comment.

The major carriers all added $10 surcharges over last weekend after Continental boosted its fares to help offset the cost of fuel, but by Monday all of them had backed off because, as usual, Northwest refused to boost its fares across the board. Northwest matched the change only on some of its lowest fares.

To remain competitive, carriers usually scrap fare changes if rivals decide not to match them. The airlines are trying to boost fares because jet-fuel prices for delivery in New York Harbor have climbed 54 percent since Dec. 6. Major U.S. carriers lost a combined $11.3 billion last year as business travel declined and they slashed ticket prices to attract travelers.

"Will the others match this surcharge? Unless they have a gas credit card with a really high limit and a really low interest rate, they had better," said Terry Trippler, who monitors fares for the consumer air-travel Web site cheapseats.com.

Northwest likes "to do things their way. They're trying to bring discount pricing closer to walk-up fare pricing," said Blaylock & Partners analyst Ray Neidl. "This is one of many steps they'll have to take to do that."

On Tuesday, American, Northwest and United raised fares $3 each way on routes where they compete with ATA Holdings Corp., which initiated that increase. Northwest couldn't immediately say if the $10 increase applied to those routes.

"We're doing it to improve our revenues," said Northwest spokesman Kurt Ebenhoch. "We've imposed a $10 each-way fuel surcharge on the fares where we believe it can be sustained."

Fuel generally is an airline's second-biggest expense, after labor. For every cent the cost of jet fuel rises, industry costs increase $180 million, according to Air Transport Association.

The carriers are paying more for fuel because crude-oil prices have risen amid concern about a U.S. war with Iraq.

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