updated 10/8/2004 6:34:02 PM ET 2004-10-08T22:34:02

Airlines the world over are raising fares in response to the latest oil price hike, which threatens to choke off a gradual recovery in air travel and deepen the woes of carriers already struggling with bankruptcy.

British Airways became the latest airline to increase ticket prices Friday after American Airlines raised one-way domestic flights by $5 earlier this week, prompting United Airlines and Continental Airlines to follow suit.

BA said it was adding $36 to the price of a long-haul round trip as the price of a barrel of light sweet crude soared over the $53 mark in New York on Friday.

The latest round of fare hikes could dampen demand for air travel, industry watchers warn, just as passenger traffic figures were beginning to recover from a series of setbacks.

Air France and the German airline Lufthansa are among carriers that have scaled back their short-term growth forecasts, reflecting expectations of more muted demand.

If a prolonged rise in oil prices triggers a broader global economic slowdown, airlines will suffer even more as nonessential business travel and ambitious holiday plans are cut back.

"Any dampening effect is most likely to come through the impact of higher oil prices on economic growth and consumer sentiment," said Brian Pearce, chief economist at the International Air Transport Association, which represents major airlines.

The surge in fuel prices since the start of the year, when oil traded at around $30 — and when many carriers hoped it would fall — is just the latest calamity to beset airlines.

The global industry has lurched from crisis to crisis since the Sept. 11 terror attacks, racking up combined losses of about $30 billion. A tentative recovery in 2002 was reversed the following year by the SARS epidemic, which cut passenger numbers globally and halved them on Asian routes.

Early in 2004, with the worst of the SARS fallout behind it, IATA dared to forecast a $3 billion profit for its members over the year. But oil soon clouded the outlook, and IATA predicted a $4 billion loss for the industry weeks before light sweet crude crossed the $50 line on Sept 28.

Analysts say the biggest victims could be airlines that find it difficult to raise fares — like major carriers in the United States, where overcapacity and cutthroat competition prevent higher fuel costs being passed on to passengers.

The U.S. fare hikes are outstripped by the price increases elsewhere, including Air France and its Dutch carrier KLM Royal Dutch Airlines, Lufthansa, Italy's Alitalia and Swiss International Air lines.

US Airways and United are both struggling to emerge from bankruptcy, while others, such as Delta Air Lines, have warned they could soon file for Chapter 11 bankruptcy protection unless costs start coming down.

Andrew Lobbenberg, London-based aviation analyst with ABN Amro, said other factors make U.S. airlines particularly vulnerable.

"They don't have the protection of the feeble dollar, and they broadly speaking don't have hedging," he said.

The dollar's weakness against the euro has helped cushion Europe against the high price of oil — traded and billed in dollars — while U.S. carriers' weak credit ratings prevent them from buying long-term oil futures or other instruments to "hedge" against fuel price increases.

Even airlines that have raised fares are likely see their bottom lines eroded by fuel costs in the last quarter, however, since a large proportion of seats are booked months in advance.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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