It will now cost an extra $120 to fly from one end of Canada to the other

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MONTREAL - The cost of air travel for many Canadians surged yesterday after Air Canada (TSX:AC.A) quietly imposed domestic fuel charges for the first time in four years that could, for example, add an extra $120 for a round-trip ticket across the country.

The price increases, imposed yesterday, would add $120 a round-trip for flights of more than 1,001 miles, or 1,601.6 kilometres, each way. Smaller surcharges would be slapped on tickets for shorter trips.

For example, people flying from Halifax, Montreal and Toronto to Calgary, Edmonton, Regina or Vancouver would pay the highest surcharges as the country's largest airline tries to recoup soaring costs for jet fuel.

Air Canada applied the surcharge to transborder flights to the United States on Thursday, matching similar moves by the big American carriers. It added the surcharge to domestic trips on yesterday.

The new surcharges are $40 return for flights of less than 480 kilometres, $80 return on flights between 480 kilometres and 1,600 kilometres and $120 for longer flights.

The fuel surcharges are effective immediately on all flights booked, the airline says. They weren't announced and could only be found in the fine print on the company's website.

"The cost of everything is going up," Air Canada spokeswoman Isabelle Arthur said in an interview.

"The fares have been very, very volatile and there have been previous increases we didn't announce every time."

The airline plans to upgrade its website as soon as possible to clearly indicate surcharges, including fuel.

On Thursday, the three biggest U.S. air carriers, American Airlines, United Airlines and Delta Air Lines, raised fares to improve their finances. With the price of oil soaring to record highs, Air Canada decided for the first time in four years to no longer include fuel costs in base fares.

International tickets already have fuel surcharges, but those rates are adjusted case by case.

It wasn't immediately clear whether other Canadian carriers will apply similar surcharges.

Calgary-based WestJet Airlines (TSX:WJA), the No. 2 scheduled airline, and Porter Airlines, which flies from the Toronto Island Airport to domestic and U.S. cities, are studying the move.

"We are certainly looking at it but we haven't made any decisions at the present time," spokeswoman Gillian Bentley said.

WestJet also hasn't followed Air Canada's lead of charging the $25 for second checked bags on North American flights for the cheapest fares.

But analyst Cam Doerksen of Versant Partners suspects other airlines will follow Air Canada's lead.

Raising fares too much will diminish travel demand. The question is are these hikes enough to force changes, he said.

"This is the real test," Doerksen said in an interview. "Is demand strong enough that the airlines can effectively raise fares by what is a fairly significant amount?

"At some point, if you raise fares enough, it's definitely going to have an impact on travel demand."

With fuel costs soaring so rapidly, the surcharge allows Air Canada to respond quickly to changes in fuel prices in a way that is less confusing than altering fares daily, Arthur said.

"Now passengers will see the cost of fuel and be able to really see how it impacts their travel."

Incorporating fuel costs within fares is no longer workable because of the volatility of fuel prices, the airline said.

Yesterday, the world price of a benchmark crude oil increased to a record US$126.20 per barrel. The cost of jet fuel is even higher than crude but the actual price that Air Canada pays is determined by a number of factors including its hedging program.