Air Fares Post Record Jump

U.S. airfares took their biggest jump on record, according to the latest government figures, allowing rates to return pre-Sept. 11 levels for the first time since the terrorist attack drove down demand for air travel.

And with a fare hike announcement from Delta Air Lines Wednesday, more fare hikes could be on the way.

The Department of Transportation index of airline fares released Wednesday showed a 10.3 percent increase in fares for all flights starting in the United States in the first quarter, compared to the year-earlier period, and an 8.8 percent year-over-year increase on all flights that either depart or arrive at a U.S. airport. Both are the biggest jumps recorded since the index started in 1995.

The two indexes now are at a higher level than in the second quarter of 2001, just before the Sept. 11 attack. The only quarter they were slightly higher was in the first quarter of that year, but a slowdown in the economy in 2001 had driven down air travel and fares even before attack.

The airport with the largest increase according to the report is Cincinnati, which showed an average 36.6 percent year-over-year increase according to the report. Delta trimmed flights at its hub there after its September 2005 bankruptcy filing.

Greensboro/High Point, N.C., Charleston, S.C., Raleigh/Durham, N.C. and Savannah, Ga., where the other markets that saw 18 percent or larger annual increases in fares.

Only three markets -- Honolulu, Denver and Kahului Hawaii on the island of Maui posted year-over-year declines in fares, with Honolulu fliers seeing the biggest break, a 4.6 percent decrease.

The Air Transport Association, the trade group which measures the revenue collected by its member, has shown that fares have continued to rise in the second quarter. The average yield on domestic flights, measured by revenue paid per mile flown by paying passengers, rose by about 12 percent annually in each month of the quarter, reaching 13.36 cents in June.

But that yield is still below the average from 1995 through 2000, as well as the first five months of 2001.

Bankrupt U.S. airline Delta confirmed to Reuters on Wednesday that it raised fares by $5 one-way on most domestic routes earlier this week. Other major U.S. airlines said they were studying the fare hike, but with low-fare carriers such as Southwest Airlines and JetBlue Airways raising fares this year in the face of rising fuel costs, and a record percentage of available seats expected to be filled, further hikes are expected.

J.P. Morgan Securities' analyst Jamie Baker wrote in a research note that he expected most carriers to follow Delta's lead.

"Given continued Mideast uncertainty and the reality of $74 crude - and with scant evidence of consumer elasticity as fares push ever higher - other carriers are likely to match over the next 48 hours," Baker wrote.



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