Skyrocketing fuel costs have plunged U.S. airlines into a sea of red ink -- and travelers can expect higher air fares and fewer flights from which to choose as a result.
United Airlines on Tuesday became the latest victim of the industry's woes. The airline's parent company reported a larger-than-expected loss in the first quarter, sending its stock into a tailspin.
Analysts and industry executives said that ticket prices needed to rise significantly just as the peak summer travel season takes off to help airlines weather the recent surge in oil prices, which is pushing up the price of jet fuel to record highs.
"There needs to be a minimum 15% across-the-board hike in fares to offset higher fuel costs," said Vaughn Cordle of AirlineForecasts in Washington. "This problem is going to devastate the industry -- in fact, it already has."
Such a boost would increase a typical round-trip economy fare from Los Angeles to Dallas-Fort Worth, for example, to nearly $280 from $242.
Although the higher prices would be painful for travelers, some industry watchers say they are essential to rescuing the airlines. Some analysts said the industry's financial pain was reaching levels not seen since the aftermath of 9/11, when a slump in air travel drove several big carriers into bankruptcy.
The industry estimates it will spend almost $60 billion on jet fuel this year, up from $15 billion in 2003.
"An airline ticket has got to reflect the full cost of fuel," Richard Anderson, chief executive of Delta Air Lines Inc., told reporters Tuesday in Washington, suggesting a fare increase of 15% to 20% was needed.
United's parent, Chicago-based UAL Corp., posted a first-quarter loss of $542 million. The airline, the No. 2 carrier at Los Angeles International Airport, blamed the loss primarily on a $618-million jump in fuel costs -- 50% more than a year earlier -- as well as the slowing U.S. economy.
"The pressure of high energy prices and a weakening U.S. economy are a wake-up call that the pace of change must accelerate," said Glenn Tilton, CEO of UAL. "The path to sustainable profitability requires us to fundamentally overhaul every facet of our business."
United's loss was bigger than Wall Street expected and rattled investors. UAL shares plunged 37%, falling $7.88 to $13.55. American Airlines parent AMR Corp. fell 14%, and Continental Airlines Inc. slid 17%. Oil jumped $1.89 to $119.37 a barrel in New York trading Tuesday.
