Southwest raises fares, others match

CHICAGO (Reuters) - A $10 fare hike by Southwest Airlines Co, has triggered matching fare increases by rivals as the industry struggles to offset soaring fuel prices and build on a recovery that began last year.

The leading U.S. low-cost carrier on Tuesday said it raised one-way fares over the weekend.

AMR Corp's American Airlines, UAL Corp's United Airlines, Northwest Airlines Corp and US Airways Group all said they matched Southwest's move. Other airlines weren't immediately available for comment.

U.S. airlines have initiated several revenue-boosting fare increases this year, but many attempts have failed due to a lack of matching by low-cost airlines like Southwest.

Southwest has long been the biggest obstacle to fare hikes because its well-hedged fuel consumption makes it less vulnerable than competitors to spikes in oil prices. But as the carrier's below-market hedges expire, the airline is losing that cost advantage and must hike fares to compensate.

"It is increasingly evident that if we are to count on higher oil prices, we can count on Southwest pushing fares higher," said JP Morgan airline analyst Jamie Baker in a research note.

Southwest increased fares on flights of over 1,250 miles $10 each way effective August 31, while it raised tickets on select short- and medium-haul routes by $1, $3, and $5 each way, company spokeswoman Beth Harbin said.

Baker noted that US Airways and Alaska Air Group benefit more than other airlines because an estimated 35 percent to 40 percent of their revenue is derived in markets where Southwest leads pricing.

Southwest shares were up 0.99 percent at $15.26 in morning trade on the New York Stock Exchange. Shares of US Airways were up 4.01 percent at $32.19 on NYSE.

(Reporting by Chris Reiter and Kyle Peterson in Chicago)