"Latest round of airfare increases unravels"

Tuesday, May 15, 2007

Latest round of airfare increases unravels 


CHICAGO (Reuters) - Last week's $5 increase in one-way domestic airfares
eroded further Monday along with the ability of major airlines to pass their
high fuel expenses to passengers during the peak summer travel season.

All the major airlines that raised fares last week have partially rolled
back the increases after low-cost carrier Southwest Airlines failed to
match, said Neil Bainton, chief operating officer at FareCompare.com.

Continental Airlines, American Airlines, Delta Air Lines, United Airlines
and US Airways all scaled back the increase, Bainton said.

Airlines must find some way to implement revenue-boosting fare increases to
offset soaring fuel prices, he said.

"They've got to get some pricing strength or firmness going," Bainton said.
"Somehow, this has got to stick."

The U.S. airline industry last year recorded its first profitable year since
2000, and Wall Street is counting on the industry to extend its
profitability in 2007. 

A series of fare increases seems to have faltered in recent weeks, with one
attempt earlier this month failing within a few days. 

The recent failures follow a period of more than a year in which airlines
raised fares several times with no apparent dampening effect on travel
demand. 

The fare increase launched last week by Delta Air Lines was an effort to
offset soaring jet fuel prices. 

Rival carriers, such as American and Continental, quickly matched.

But the increase began to unravel on Sunday when American, Delta and United
pulled fare increases on routes that overlapped service by Southwest.

Industrywide fare increases tend to collapse if they aren't broadly matched.

Airlines, which are gearing up for the busy summer travel season, have
sought to raise fares to offset higher costs of jet fuel, which vies with
labor as an airline's largest expense. The price of jet fuel has risen about
17% over the last four months.

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