Fare hike will add to student travel

By JAIVIN KARNANI
Staff Writer

pring Break, once again, is upon us. Although students will have to deal with the usual trek of midterms and papers before taking the plunge into the furthest body of water they can possibly get to, many are already planning where to go and most importantly, how to get there.

Traveling, however, will be a little more costly this year. Rising fuel costs have put a dent in the earnings of many of the nation's airlines, and with the policy of customers first, that means that travelers will have to pay for it. As of Feb. 1, when one purchases an airline ticket by any method, one will probably be paying a slightly increased price as a result of a surcharge that most major airlines have added to their fares. Depending on the airline, the surcharge will add from $4 to $20 to the price of one's round-trip ticket.

Twelve U.S. airlines have now imposed a fuel surcharge for travel on or after Feb. 1, according to Terry Trippler of 1travel.com. Continental Airlines was the first to initiate a $20 charge on round-trip domestic fares to offset fuel costs. Other airlines have followed suit and matched the surcharges, leading industry analysts to believe that the charges will stick.

The following airlines have added a $20 round-trip fuel surcharge: America West, American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, TWA, United Airlines and US Airways. Alaska Airlines is charging $10 per round trip, Hawaiian Airlines is charging $6 per round trip, Midway Airlines is charging $6 per round trip (for business fares) and Southwest Airlines is charging $4 to $8 per round trip.

These fare hikes come after the Organization of Petroleum Exporting Countries decided in March 1999 to reduce their output of oil by 7 percent, or 1.7 million barrels per day. This has caused the price of oil to double in the past 11 months.

The recent cold weather in the Northeast United States has also led to the increase in demand of oil and thus the further increase in prices. Airlines are hit particularly hard by this, since fuel is the airlines' second-largest cost.

"It is understandable that the airlines want to make up for the cost of the higher prices of fuel by imposing surcharges," said Anand Khemlani, a senior majoring in business, "but they don't give us more discounts when fuel prices are lower."

International carriers have also followed on the heels of U.S. airlines' move. British Airways also raised fares on North Atlantic flights to offset surging fuel prices, as profits have plunged in part because of rising fuel prices. It is hiking premium fares and most economy fares across the north Atlantic by 3 percent starting Feb. 1.

In a rare form of unity, the surcharges have been applied across the board of the major airlines. "United, American Airlines and Delta Airlines have all filed three percent increases on the North Atlantic and we're following,'' said a spokesman for British Airways.

However, price competitiveness is still an issue in some sectors. "We haven't done so on a few economy fares where we it would make us uncompetitive," the spokesman for British Airways added.

The price of jet fuel rose throughout last year and skyrocketed last month, threatening the bottom lines of most airlines. Jet fuel closed at $267 per ton on Thursday, compared with about $110 at the beginning of 1999, said Alessandra Galloni of Reuters News.

"The addition of fuel surcharges by these airlines is unnecessary, as the cost of fuel is already priced into the ticket," said Xavier Dreze, marketing professor. "Disguising them as fuel surcharges allow the airlines to effectively raise the price of the ticket without suffering any price competitiveness issues."

A report just released by Arthur Andersen and Cambridge Energy Research Associates states that oil prices are likely to drop in the coming months as OPEC gauges what the world can afford.

Organization officials believe that the Organization of the Petroleum Exporting Countries likely will increase production in the late spring to bring prices back down to a more manageable level and dampen inflation, which could slow economic growth and stifle demand worldwide.

Airlines have not been the only ones affected by rising fuel prices. Consumers have directly had to pay the difference at the pump, with the cost of a gallon of regular unleaded currently around $1.40 per gallon as compared with around $1.10 per gallon this time last year.

"Although the price increase doesn't seem that large at first, it adds up quickly at the pump," said Michelle Little, a senior majoring in international relations. The increase in price, however, isn't as dramatic when compared to the rise in the price of jet fuel; it has nonetheless hurt the bottom line of many consumers.

"The airlines are suffering as ticket prices have gone down, reducing margins, so they are doing all they can to reclaim the profit margins," said Professor Xavier Dreze. The forecasts of lower oil prices, however, will eventually force the airlines to remove the surcharges and find other methods of increasing profits. In the meantime, spring break will be a little more costly.

Copyright 2000 by the Daily Trojan. All rights reserved.
This article was published in Vol. 139, No. 21 (Thursday, February 10, 2000), beginning on page 1 and ending on page 3.