Business your connection to The Boston Globe

JetBlue, Southwest to raise air fares

Higher fuel costs drive move, which others may follow

Two of the nation's leading low-cost airlines signaled yesterday that they intend to raise fares this year, which could ease pressure on other airlines and allow them to also increase prices.

At a conference in New York, executives of JetBlue Airways Corp. and Southwest Airlines Co. said they need to boost revenues to offset rising costs, particularly for jet fuel.

''We need a higher average fare for our tickets," said David Neeleman, chief executive at JetBlue, which reported its first quarterly loss this month and is forecasting a loss for all of 2006. ''We need to get another five bucks or 10 bucks if we really want to make some money."

Laura Wright, chief financial officer at Southwest, said it's facing $600 million in higher fuel costs this year and will need to cover that expense. ''We're going to have to see revenue improvement to cover those fuel costs," she said.

Terry Trippler, an airline specialist at, said the cost pressures that other airlines have been struggling with for years are finally starting to catch up with two of the leading low-cost carriers.

''They're the darlings of Wall Street," Trippler said of the two airlines. ''Once they start losing money the 'legacies' don't look so bad."

So-called legacy carriers such as American, United, Delta, Continental, and Northwest have had to cut their costs dramatically, often while in bankruptcy protection, to compete with discounters such as Southwest and JetBlue. Both have lower cost structures.

JetBlue, for example, has been flying newer jets with lower maintenance needs. But those jets are now six years old and maintenance costs are rising -- up 43 percent last year compared to the year before, according to the airline.

JetBlue is one of the fastest-growing carriers at Boston's Logan International Airport, with 40 daily departures. Southwest is the dominant airline at the airports in Manchester, N.H., and Providence.

Trippler said Southwest has already boosted its roundtrip fares about $2 to $3, but he expects bigger increases. Industrywide, he is forecasting leisure fares will increase roughly 10 percent this year and business fares 4 to 5 percent.

JetBlue officials also said they may reduce the number of lower-priced fares on each flight, forcing passengers to gravitate to more expensive seats. The net impact would be greater revenue.

The average one-way JetBlue fare rose from $88.84 in 2000 to $110.03 last year, the airline said, partly reflecting the addition of more expensive longer-haul flights as the airline expanded.

JetBlue plans to continue expanding, adding as many as 10 cities this year and increasing its seat capacity nearly 30 percent.

Southwest officials also said they plan to keep expanding, adding 30 aircraft this year and possibly one new destination.

Ned Raynolds, a spokesman for American Airlines, declined to comment on his airline's pricing plans. But he said American, which cut costs and reduced its domestic seat capacity 4 percent last year, and the entire industry need fewer seats and higher fares.

''The situation has improved, but it's not where we would like it to be," he said.

According to the federal Bureau of Transportation, airlines carried 4.3 percent more domestic passengers through the first 11 months of last year, while operating 1,140 fewer flights. The load factor, the number of passengers carried as a proportion of available seats, was 77.3 percent, up from 74.7 percent in the same period the year before.

JetBlue, blaming high fuel costs and ''a tough revenue environment," this month reported a $42.4 million loss for the fourth quarter and forecast a loss for all of 2006.

Southwest is in better shape. It reported net income of $548 million for 2005, up 75 percent, compared to 2004, and its executives were optimistic about revenue trends for the first quarter.

Bruce Mohl can be reached at Material from Bloomberg News was used in this report.

Today (free)
Yesterday (free)
Past 30 days
Last 12 months
 Advanced search / Historic Archives