For the first time since the oil crisis of the late 1970s, some airlines and trucking companies are raising air fares and shipping rates to cover a sharp jump in fuel costs.
Most analysts expect the fuel-related increases to spread across both industries if fuel prices continue their dramatic rise.
The surge in fuel prices has been blamed on a prolonged cold snap in the East, which sharply increased demand for heating oil, frozen pipelines in Louisiana and last week's fire at an important Gulf Coast oil refinery.
The fuel increases--and related fare and rate hikes--are viewed as temporary and weather related, in sharp contrast with the supply disruptions that sent prices skyward and created gasoline lines a decade ago. Most transportation industry executives and analysts expect fuel costs to ease during the first three months of this year.
"It is a seasonal phenomenon," said George G. Morris, a trucking industry analyst with Prescott Ball & Turben in Cleveland.
Nonetheless, the impact on fragile companies, especially in the troubled trucking industry, could be dramatic. Lana Battes, a vice president with the American Trucking Assn., said the rise in fuel costs will force some weaker firms out of business, boosting the industry's already high mortality rate. About three trucking companies close every day.
"I don't think anyone in the industry is making money right now," said Don Schnieder, president of the nation's largest truckload carrier, Schnieder National Trucking Co. of Green Bay, Wis. "Every company is going to have to make some kind of price adjustment."
Schnieder estimated that most firms would boost rates 7% to 8%.
The prices of jet fuel and of diesel fuel, which is most closely tied to heating oil, have jumped 30% since the summer, according to industry spokesmen. Much of that increase has come in the past few weeks.
On Wednesday, United Airlines, Trans World Airlines and Pan American World Airways responded to the fuel hikes with fare increases on most domestic routes. Continental Airlines and Northwest Airlines announced similar fare boosts on Tuesday.
Most of the airlines that raised fares are imposing a 4% hike, effective Jan. 10. United's increase goes into effect Jan. 11.
Northwest and TWA decided to tack on flat-rate fuel surcharges, rather than incorporate the increase into fares. Northwest is adding $6 to one-way fares and TWA is adding $5 to one-way fares for trips under 500 miles and $10 to fares for longer one-way trips.
Northwest spokesman Bob Gibbons said consumers may be more sympathetic to a fuel surcharge than a fare increase. Through much of the country, he said, consumers are paying more for gasoline and heating oil. "They can see an impact in their own lives," he said. "They can readily recognize that it impacts us, too."
Unlike the air fare hikes that go into effect next week, the rate increases in the trucking industry might not have much impact on consumers. Transportation industry executives expect large shippers, such as General Foods and Procter & Gamble, to absorb the extra costs, at least initially.
But if fuel prices remain high for "more than a month or two, I think those costs will ultimately pass to the consumer," said Paul Bergant, marketing vice president for J. B. Hunt Transport Service, one of the nation's largest trucking firms.
Bergant said his firm's 6% rate hike fluctuates with the price of diesel fuel, which now costs an average of $1.43 a gallon. If it drops to $1.07, the fuel surcharge will disappear, he said.
Most transportation industry analysts expect the fuel-related increases to stick, despite a history of resistance to rate hikes in the airline and trucking industries. For example, when Emery Air Freight, a unit of Palo Alto-based Consolidated Freightways, imposed a 7% fuel surcharge last June, its customers revolted. Some switched to other air shipping firms.
J. B. Hunt's Bergant said his firm's customers, which include Nabisco and Ft. Howard Paper, have taken the rate hikes in stride. "They all drive cars," he said. "They see the problem."
The airlines might have a more difficult time persuading consumers to pay more, industry analysts said. The fuel-related boosts came just a week after the airlines reduced fares by up to 30% on their most heavily traveled routes to generate traffic during the traditionally weak winter months.
And on Tuesday, financially troubled Eastern lowered its fares on its northeastern routes to Florida, reductions that were matched Wednesday by USAir, TWA and Midway Airlines.
Raymond Neidl, an airline industry analyst with Dillon, Read & Co., said the selective fare reductions suggest the airlines are concerned about a drop in traffic during the first quarter and possibly into the spring. Neidl said that if reservations for the spring months decline, fares will also.
PASSING ALONG HIGHER FUEL COSTS It is uncertain how long surcharges and higher air fares will last. Carrier: Action Continental: 4% fare hike Pan Am: 4% fare hike United: 4% fare hike Northwest: $6 fare surcharge TWA: $5 surcharge on trips under 500 mi TWA: $10 surcharge on trips over 500 mi