New air fare increases shot down quickly
A broad-based air fare increase started just a week ago unraveled quickly, a development industry insiders say bodes poorly for future air hikes.
The move was started by Delta, which early this week rescinded the $5 one-way increase.
Airlines, struggling to offset historically high fuel prices, have raised fares several times in the last year. Experts told Reuters that trend may be coming to a close.
“This represents the second failure out of three broad-based attempts this year, though failures are reasonably common,” said JP Morgan airline analyst Jamie Baker in a research note.
That said, the relevance and likelihood of future increases is increasingly debatable, he wrote.
Delta’s fare hike was matched by AMR Corp’s American Airlines and United Airlines. Those two carriers also jettisoned the increase a few days later.
Northwest Airlines, which only partially matched the initial fare hike, said it was reducing fares.
Another airline expert, Terry Trippler said he expects the pace of fare increases to slow in 2007. But he still sees fares climbing between 5% and 8% over the course of the year.
Higher fares and full planes have bolstered earnings for airlines, helping them out of a severe slump that began in 2001.
Low-fare competition in the industry, however, has made it hard for carriers to raise fares enough to cover their expenses.
Report by David Wilkening
David
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