UAL raises surcharge to offset soaring fuel costs

CHICAGO Fri Jan 11, 2008 2:52pm EST

An United Airlines Boeing 747-400 jet airplane takes off from Frankfurt airport, March 14, 2007. REUTERS/Kai Pfaffenbach

An United Airlines Boeing 747-400 jet airplane takes off from Frankfurt airport, March 14, 2007.

Credit: Reuters/Kai Pfaffenbach

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CHICAGO (Reuters) - UAL Corp UAUA.O, parent of United Airlines, said on Friday it has increased its domestic fuel surcharge, bringing the total to $25 each way on all domestic routes.

The increase in the surcharge, which is in addition to the base air fare, varies depending on the market. In some markets where United faces low-cost competition the surcharge had been $5 or less. Elsewhere the surcharge had been $10.

The airline industry has been pressured by skyrocketing fuel costs as the price of oil hovers near $95 a barrel. Carriers have attempted to offset that expense with fare hikes and surcharges.

Last week, UAL initiated a fare increase that was broadly matched by competitors. But some analysts predict carriers will have trouble raising fares if economic weakness erodes travel demand.

"Every penny increase in a gallon of jet fuel costs our industry $195 million annually, and while we operate more efficiently, we must be able to pass commodity costs on to customers, as other industries do," said UAL spokeswoman Robin Urbanski.

Representatives from other airlines were not immediately available to say whether they would match the surcharge.

Shares of UAL were down 33 cents, or 1 percent, at $31.86 in afternoon trade on Nasdaq.

(Reporting by Kyle Peterson; editing by Mark Porter)

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