Low-fare Airline Carriers Southwest, JetBlue May Add Fees To Deal With Fuel

June 18, 2008 6:21 p.m. EST

New York (AHN) - With the price of jet fuel rapidly approaching $4 a gallon, even the traditional low-cost carriers are dealing with the prospect of being forced to raise fares.

Southwest Airlines CEO Gary Kelly said Wednesday his company had hoped to get through 2008 without significant fare increases, adding that the increasing price of oil won't likely allow for that to happen. Kelly made the comments at the Merrill Lynch Global Transportation Conference in New York, by Web cast.

Southwest (LUV, Fortune 500), a large carrier known for keeping costs and fares low, would be looking to push fares up "gently," but avoid extra fees, Kelly said.

Southwest has been running ads pointing out it has avoided passing on surcharges for services like baggage checks and snacks. With oil prices at or near $140 a barrel on any given day in recent weeks, some carriers have raised fuel surcharges, cut back on flights and started charging fees for services, such as checked luggage, among them American Airlines and United Airlines.

The worldwide price of jet fuel hit $3.971 a gallon last week, according to the International Air Transport Association. Airlines executives know it's not going to peak there. "We're preparing for $4 jet fuel," Kelly said at Wednesday's conference, adding Southwest is "aggressively experimenting" in several markets to see what combination of fare hikes and cost-cutting measures will pacify customers and keep the planes flying.

JetBlue Airways is also looking at such options. "Everything is on the table," JetBlue CEO David Barger said at the conference.