"Airfare increases may be just the beginning"

Saturday, September 25, 2004

Airfare increases may be just the beginning
BY BOBBY WHITE
The Fort Worth (TX) Star-Telegram


Airlines apparently pushed through a fare increase Friday after months of
unsuccessful attempts to hike prices, helping to offset record-high jet fuel
costs.

Continental Airlines became the last of the major hub-and-spoke carriers to
match an increase launched Wednesday by American Airlines. Fares are $5
higher for one-way trips and $10 higher for round trips.

Tom Parsons, who runs the Bestfares.com Web site and magazine, said he
wouldn't be surprised if airlines tried to raise prices again next week.

"The floodgates may have just opened," he said.

The airlines have tried several times to raise fares, but rescinded the
hikes after at least one major competitor -- often, Northwest Airlines --
didn't follow suit.

This time, Northwest went along with the increase.

"Traditionally, it was Northwest which reined in efforts," Parsons said.
"Not this time. Carriers are probably saying, 'Hey guys, we just got the
green light.' "

Discounters such as Southwest Airlines didn't match the increase. That means
markets served heavily by discounters, like Los Angeles, won't feel the
price increase as badly, Parsons said. But he expected the price hikes to
stay in effect elsewhere.

In a recent financial update, American said its unit revenues for the third
quarter will be down as much as 3.5 percent from the same period last year.
Conversely, unit costs for the quarter are expected to rise compared with
last year. The reason for the cost increase was fuel prices.

The company reported that rising fuel costs actually cost it an additional
$1 billion in 2004.

The third quarter typically is marked by uplifting results, given July and
August travel. But this year, Florida, a popular destination for travelers,
was pounded by multiple hurricanes.


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