United Airlines Raises Business Fares and Ticket Change Fee to Cope With Hiking Oil Prices

United Airlines said it was increasing business travel fares and the fee it charges passengers to change tickets in an effort to offset high jet fuel prices, that have risen 80% in 2007. United's ticket-change fees will rise to $150 from $100. The ticketing policy, which came to light as oil prices topped $115 a barrel, could pressure other carriers to follow suit. However, history also shows few fare increases in the past failed to stick after competitors refused to follow.

U.S. airlines have been raising fares, adding fees, and cutting capacity to cope with a weakening economy and high fuel costs. With the oil prices keep rising, no one can predict how high fares could rise.

A spokeswoman for United Airlines Robin Urbanski said in an email that United was also requiring Saturday-night stays in about 65% of the markets it serves. This translates to higher airfare for the business travelers who typically don't spend a Saturday night in their destination. Given today's business climate, the fare hike will certainly discourage business travel, which makes up a significant part of United's revenues. Under United's new policy, leisure travelers who opt to stay over weekends will have less impact and still be able to find lower airfares.

In her email, Urbanski said, "In an environment where fuel prices are averaging almost $120 a barrel, we are facing a cost increase of more than $2 billion this year, and that is more than twice the operating earnings we generated last year". She said, "Making these changes is another example of how we need to continue to adapt to today's tough market realities and find new ways to generate revenue". Earlier, Urbanski also said United faces competition from budget carriers like Southwest Airlines Co. on about 80% of its domestic routes.

On another front, the surge in oil prices has left airlines scrambling to find ways to boost non-ticket revenue by charging extra for food, drinks, baggage and added legroom.

Because fare increase is the surest way to boost airline revenues, air carriers, e.g. United Airlines, are likely to continue pushing fares higher even if they eventually have to roll back their fare increases.

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