Fuel costs nip profits

United Continental Holdings Inc. said Thursday it lost $213 million during the first quarter, as a larger fuel bill burned up gains from fare increases.

Soaring jet fuel prices are wiping out profits at the nation's biggest airlines.

United Continental Holdings Inc. lost $213 million in the first quarter after its fuel bill jumped by $560 million, the world's biggest airline company said Thursday. Southwest and JetBlue scratched out tiny profits despite higher fuel costs. A day earlier, American Airlines reported a $436 million loss.

With jet fuel getting close to 2008 highs, airlines have been raising fares to compensate -- seven times so far this year. United Continental revenue rose 10.8 percent to $8.2 billion compared to a year earlier. Southwest revenue rose 18 percent to $3.1 billion. Higher fares covered much of the fuel increase, but not all.

Even with the industry's poor showing in the first quarter, analysts expect nearly all airlines -- with the notable exception of American parent AMR Corp. -- to be profitable for the full year. In 2008, when oil rose as high as $147 per barrel, the biggest U.S. airlines, excluding Southwest, lost a combined $19.24 billion.

Independent airline analyst Bob Herbst said the big reason airlines are healthier than in 2008 is fares that are at least 25 percent higher. And even though the economy is stronger now, airlines have not added an excessive amount of flying. And airlines have less debt and more cash.

Also, in 2008 they were headed into a recession. This time they're headed out of one, and demand is stronger.

But will the airlines raise fares too much, and wind up scaring away customers?

Southwest, which blocked some other fare hikes, went along this week with a $10 round-trip increase but might not next time.

Southwest CEO Gary Kelly, whose company started serving Charleston in March, said higher fares inevitably drive away budget-conscious leisure travelers, although he said that isn't happening yet -- at least on his airline. Southwest traffic jumped 11.9 percent.