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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: yard_man who wrote (8810)	2/27/2004 12:07:54 PM
From: russwinter	Read Replies (1) of 110194

Reuters Continental Ups Fares, Fuel Costs Cited Friday February 27, 11:25 am ET CHICAGO (Reuters) - Continental Airlines Inc. (NYSE:CAL - News), the fifth-largest U.S. carrier, on Friday said it increased fares on domestic tickets, citing "persistently high" fuel prices. The Houston-based company said it raised fares $5 on one-way tickets and $10 on round-trip tickets. It said the increases apply to restricted and unrestricted fares. "This fare increase is a step toward matching fares with the cost of providing air travel," Chief Financial Officer Jeff Misner said in a statement. Spot crude is trading at more than $35 per barrel and jet fuel has been trading at about $1.02 to $1.25 per gallon. Prompt crude peaked at $36.37 on Jan. 20, the highest price since just prior to the U.S.-led war in Iraq in March. It was not immediately clear whether other carriers would match the price increase. When other airlines fail to match in competing markets, generally the company that initiated the increase will reverse the decision. Fuel is the second-largest expense for an airline behind labor costs. While many U.S. airlines were waiting for prices to come down late last year and hence provide hedging opportunities, they never did. Hedging uses futures, options and other derivative instruments like swaps to lock in favorable prices. Few U.S. airlines are hedged in any significant way throughout most of 2004 as a result, with the exception of Southwest Airlines (NYSE:LUV - News). Shares of Continental were 2 cents lower on the New York Stock Exchange (News - Websites) to $14.83 in morning trading. (With reporting by Jonathan Stempel in New York)

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