Good to see this now before the summer hits and the price per barrel peaks!
Continental ups fuel surcharge to $15
By August Cole, CBS.MarketWatch.com
Last Update: 12:38 PM ET March 26, 2004
Story source
SAN FRANCISCO (CBS.MW) -- Continental Airlines moved Thursday to get passengers to shoulder a larger portion of its fuel costs, raising a surcharge by 50 percent to $15 on some domestic flights.
Jet-fuel prices this year will be "dramatically higher" than last year's $1.2 billion in fuel costs, Continental (CAL: news, chart, profile) said, noting that the price of crude oil has risen 85 percent from two years ago. Analysts see slim chances for relief any time soon, with crude prices expected to remain well above $30 a barrel.
"Our biggest challenge this year is the high cost of jet fuel," said Continental spokeswoman Julie King.
Some travel Web sites and ads include surcharges in their advertised prices, while others do not. "It's increasingly important for travelers and shoppers online and offline to get the entire price when they're budgeting," said Amy Ziff, Travelocity editor at large.
Flights to destinations in Canada, Hawaii and Alaska also will be subject to the surcharge. Continental declined to specify which flights will be affected, but airlines typically use such surcharges on routes where fares already have been discounted sharply in competition with low-cost carriers.
While it's not yet clear if the fee will be permanent and how other carriers will react, other airlines are likely to follow suit to try to offset their fuel costs. "We can expect to see more of this as we go along," said Travelocity's Ziff.
ATA (ATAH: news, chart, profile) and Frontier Airlines (FRNT: news, chart, profile) have a $15 surcharge on some flights from Chicago to Los Angeles, according to travel expert Terry Trippler.
In midday trading on Wall Street, shares of Continental Airlines gained 3.1 percent to $12.70 amid a broad market rally.
Rising fuel costs are expected to crimp the industry's earnings this year. See full story.
While labor is typically the largest expense at an airline, fuel is its No. 2 cost. And a volatile one. Every crude-oil price increase of $1 a barrel costs Continental $38 million, based on 2004's expected fuel volume, according to the company.
Many airlines use sophisticated trading strategies to hedge against volatile oil prices, but some are more sensitive to price fluctuations.
In Continental's case, the Houston-based company is hedged on 10 percent of its fuel needs this year at a crude price of $32 a barrel, according to Merrill Lynch.
Others, like Southwest Airlines (LUV: news, chart, profile), have much bigger positions, in this case 80 percent at $24 a barrel.
August Cole is spot news editor at CBS.MarketWatch.com in San Francisco.
Continental ups fuel surcharge to $15
By August Cole, CBS.MarketWatch.com
Last Update: 12:38 PM ET March 26, 2004
Story source
SAN FRANCISCO (CBS.MW) -- Continental Airlines moved Thursday to get passengers to shoulder a larger portion of its fuel costs, raising a surcharge by 50 percent to $15 on some domestic flights.
Jet-fuel prices this year will be "dramatically higher" than last year's $1.2 billion in fuel costs, Continental (CAL: news, chart, profile) said, noting that the price of crude oil has risen 85 percent from two years ago. Analysts see slim chances for relief any time soon, with crude prices expected to remain well above $30 a barrel.
"Our biggest challenge this year is the high cost of jet fuel," said Continental spokeswoman Julie King.
Some travel Web sites and ads include surcharges in their advertised prices, while others do not. "It's increasingly important for travelers and shoppers online and offline to get the entire price when they're budgeting," said Amy Ziff, Travelocity editor at large.
Flights to destinations in Canada, Hawaii and Alaska also will be subject to the surcharge. Continental declined to specify which flights will be affected, but airlines typically use such surcharges on routes where fares already have been discounted sharply in competition with low-cost carriers.
While it's not yet clear if the fee will be permanent and how other carriers will react, other airlines are likely to follow suit to try to offset their fuel costs. "We can expect to see more of this as we go along," said Travelocity's Ziff.
ATA (ATAH: news, chart, profile) and Frontier Airlines (FRNT: news, chart, profile) have a $15 surcharge on some flights from Chicago to Los Angeles, according to travel expert Terry Trippler.
In midday trading on Wall Street, shares of Continental Airlines gained 3.1 percent to $12.70 amid a broad market rally.
Rising fuel costs are expected to crimp the industry's earnings this year. See full story.
While labor is typically the largest expense at an airline, fuel is its No. 2 cost. And a volatile one. Every crude-oil price increase of $1 a barrel costs Continental $38 million, based on 2004's expected fuel volume, according to the company.
Many airlines use sophisticated trading strategies to hedge against volatile oil prices, but some are more sensitive to price fluctuations.
In Continental's case, the Houston-based company is hedged on 10 percent of its fuel needs this year at a crude price of $32 a barrel, according to Merrill Lynch.
Others, like Southwest Airlines (LUV: news, chart, profile), have much bigger positions, in this case 80 percent at $24 a barrel.
August Cole is spot news editor at CBS.MarketWatch.com in San Francisco.
