Delta Lifts Price Cap on Business Fares

Delta Air Lines raised the price cap on its most expensive fares Thursday, ending a six-month experiment with lower business fares that most competitors reluctantly matched.

Citing high fuel prices, Atlanta-based Delta raised its walk-up fares by $100 each way, to $599 in coach and $699 in first class.

Several airlines, including American, US Airways, United, Continental and Northwest, matched the price increase.

Travel analysts said that other airlines will probably raise fares accordingly. That means travelers can expect to pay more for last-minute tickets in many markets.

"With oil at $60 a barrel and over, something had to give, and today it did," said Terry Trippler, an analyst with Internet travel firm Cheapseats.com.

Airline stocks soared on the news. Delta's shares (ticker: DAL) jumped after the announcement, up 58 cents, or about 17 percent, to close at $4.02 per share.

Shares of AMR Corp., American's parent company (AMR), rose $1.08, or about 8 percent, to finish at $13.87. Continental stock (CAL) was up 59 cents, or 4 percent, closing at $15.35; Northwest shares (NWAC) rose 31 cents, or 7 percent, to end at $5 per share.

At American, the previous price cap was not absolute. Some last-minute fares were sold at higher prices, but the vast majority of tickets were priced at Delta's level.

Delta executives said that when they implemented the price cap in January, oil was selling at $43 per barrel. In recent weeks, it has moved above $61 a barrel.

"Despite our best intentions to keep the current fare caps in place, we have been forced to find ways to offset this dramatic spike in costs," said Paul Matsen, Delta's senior vice president and chief marketing officer, in a statement.

One airline said it had no plans to respond to Delta's move. Dallas-based Southwest Airlines has capped one-way fares at $299 for years.

"We love it when our competitors raise fares," said Gary Kelly, Southwest's chief executive, during the airline's second-quarter earnings call Thursday.

"We're the low-fare leader, and this makes our jobs easier," Kelly said.

Loading