When the cost of fuel oil rises, so do prices at your local gas station. But in the world of airlines, repeated attempts to raise ticket prices to cover sky-high fuel prices keep failing. Our Savvy Traveler, Rudy Maxa, explains why.

Early last week, Continental Airlines had to back down from an attempt to add five dollars to every flight to cover the rising cost of expensive jet fuel. So did United Airlines.

It's getting to be routine--that was Continental's 12th failed attempt at a time when every major airline is losing millions. The crucial words are "every major airline." The low-fair airlines--Southwest, AirTran, JetBlue and a couple of others--are still squeezing out profits. And they're the ones NOT following moves by Continental, American and other so-called "legacy airlines" to jack up ticket prices.

You see, nowadays, airline tickets are a commodity not unlike laundry detergent. Only a small percentage of buyers care about more legroom in coach or a more generous meal service. The bottom line is: How much does it cost to get from here to there?

And, of course, it costs more and more these days. Fuel generally accounts for 25 to 30 per cent of an airline's expenses. United's latest fuel bill is already estimated to be $750 million higher than the airline projected just six months ago. But unlike most markets, the airline industry has been largely unable to pass that extra cost on to you and me.

NOw, last week Southwest did raise fares a dollar or two. But Southwest is the only airline lucky--or smart--enough to have hedged much of its fuel costs last year, locking in much lower per-gallon prices than any other airline. Most of us are already paying $20 more per round-trip flight these days due to long-ago fuel surcharges that wound up sticking. But I think consumers paying 58 cents a gallon more today than this time last year to fill their cars with gas can understand if airlines raise prices.

Unless airlines manage to do that or lock in advantageous fuel prices, they can't expect to be profitable again anytime soon.

In Miami, I'm Rudy Maxa, the Savvy Traveler, for Marketplace.

June 02, 2004