Airlines fare hike seems to falter
DALLAS – The latest effort by airlines to raise fares in general – walks from $ 4 to $ 10 per round trip within the U.S. – reeled Monday, as some airlines prevented the increase.
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United and Continental the rate hikes began on Friday and most other airlines, went along at first. But on Sunday, Southwest rolled increases, and the U.S. did the same Monday morning.
"We terminated this increase, because other companies also pulled it back," said Tim Smith, a spokesman for American.
Rick Seaney, CEO of FareCompare.com, said Southwest's "waffling" over the weekend was "likely to increase this effort sink."
U.S. airlines increased based on domestic prices several times in early 2011 to increase revenue as they face rising costs fuel. The last general rate increase was in April.
Because the airlines are constantly running sales, the average fare paid by passengers often do not rise as much as the aforementioned increase in basic tariffs. Southwest and others have recently aggressive marketing for the fall, when demand decreases travel.
Airlines may be reluctant to raise prices as they fear driving away passengers. Traffic growth fell in June to the two largest companies, Continental Holdings Inc., United and Delta Air Lines Inc. Analysts say fears of declining demand has hurt airline stocks.
Airlines often do not discuss why or when they raise prices, partly for fear of violating laws that bar them from signaling pricing decisions together.
Airlines have tried to raise rates more than a dozen times this year, with about half of the increases stick, but none since April.
Ray Neidl, an analyst with Maxim Group LLC, said it was surprising that airlines are trying prices late in the summer for the slower fall season increase. He said the uncertain economy might make rate hikes are difficult and perhaps even more discount after Labor Day, "depending on how weak demand is."
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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