Latest Air Fare Hikes on Brink of Failure

American Airlines, the nation's largest carrier, had matched Continental's increase but also retreated on most routes. US Airways Group Inc. and Northwest Airlines Corp. did the same, and Southwest Airlines Co. never went along to start.


DALLAS -- Major airlines were in danger Monday of losing ground on fare increases that they attempted over the past week, as the carriers tried to navigate through weakening demand for air travel.

At least in some markets, United Airlines was sticking by its increase of up to $100 per round trip for tickets often bought by business travelers and increases of up to $20 per round trip for tickets on other routes, a spokeswoman said.

But Neil Bainton, who tracks fares for FareCompare.com, said United had dropped the increase in most of the largest markets.

Other airlines also were mostly declining to match the increases, putting pressure on United to retreat.

Continental Airlines Inc. started separate increases of $10 per round trip last week, but by Monday it had pulled back on many routes, especially where it competes with low-cost carriers.

American Airlines, the nation's largest carrier, had matched Continental's increase but also retreated on most routes. US Airways Group Inc. and Northwest Airlines Corp. did the same, and Southwest Airlines Co. never went along to start, said officials who track air fares.

Bainton, the FareCompare.com analyst, predicted that the fare increases would all be rolled back by Monday night.

Jamie Baker, an analyst for J.P. Morgan, said the refusal of discounters such as Southwest to match even the smaller increases suggested that fares might quickly fall back to last week's levels.

The sputtering attempts to raise prices come just before the summer peak travel season but also as carriers are battling with slower growth in demand for travel and a larger supply of available airline seats.

United, a unit of UAL Corp., needed to raise fares to cover the high cost of fuel, a spokeswoman said. A spokesman for AMR Corp.'s American Airlines said the same thing.

United last week raised prices on walk-up and fully refundable tickets by $100 per round trip and bumped discounted first-class fares by $50 per round trip. Those tickets are typically bought by business travelers.

Most other carriers declined to go along, preferring instead to test smaller increases.

U.S. carriers have raised fares about 20 times over the past two years, but strong demand for air travel kept occupancy rates high.

In the past few weeks, however, some carriers have reported softness in second-quarter bookings, which is likely to make it harder to raise prices. Airlines also have continued to offer discounts and fare sales, even as they pushed published fares higher.

Baker, the analyst, said consumers are paying only 1 to 2 percent more on average than a year ago for U.S. flights because of the large number of tickets sold through secondary sources such as priceline.com and hotwire.com

United is particularly aggressive in selling through such sites and in offering discounts in contrast to its "higher-end approach" on some tickets, Baker said in a note to clients.


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