Latest Round of Airline Fare Hikes Stumble

Another round of airline fare increases faltered Monday as two carriers backed down, including Continental Airlines Inc., which had started the price hikes of $10 per round trip on many U.S. flights to offset rising fuel costs.


DALLAS (AP) -- Another round of airline fare increases faltered Monday as two carriers backed down, including Continental Airlines Inc., which had started the price hikes of $10 per round trip on many U.S. flights to offset rising fuel costs.

The fate of the increase - it would have been the third in less than a month - was uncertain, however.

Several other carriers still had the higher fares in effect Monday afternoon, and analysts said Delta and Continental could still reinstate their increases.

Continental launched the latest increase last Thursday night, and over the weekend, it was generally matched by AMR Corp.'s American Airlines, UAL Corp.'s United Airlines, Delta Air Lines Inc., Northwest Airlines Corp. and US Airways Group Inc.

However, Atlanta-based Delta retreated on Monday morning. ''We're trying to remain competitive,'' said Benet Wilson, a Delta spokeswoman.

Jamie Baker, an analyst with J.P. Morgan, said Delta saw a change that Northwest made in the terms of some of its prices and misinterpreted that as a fare reduction, then dropped its price increase in response.

Continental followed Delta's lead a few hours later and canceled the increase that it started last Thursday night. A spokeswoman for the Houston-based airline also cited competitive pressure.

The overall direction of fares is clear - up. Northwest has led two successful rounds of increases, bumping prices up $10 to $20 per round trip each time.

Last month, a vacationer booking a Detroit-San Diego round trip on Northwest Airlines could have paid as little as $411, but on Monday that same ticket cost $30 more. Similar increases could be found on several carriers and on routes around the country.

The big carriers, however, avoided raising fares on some routes where they compete directly with low-cost carriers such as Southwest Airlines Co., which didn't match the latest increase, or JetBlue Airways Corp., which did.

Even when they do raise fares, airlines aren't doing so on every route or each type of ticket. This has led to an anomaly in the tradition-bound business. In some cases, carriers are flying to the same destinations as their rivals but at slightly different prices, according to Terry Trippler, who runs a Web site that tracks air fares.

For example, for a time Monday, Northwest charged $10 less than Continental for the same Minneapolis-Houston walk-up, round-trip ticket but they charged the same price for the cheapest one-way fare, Trippler said.

United charged $10 less than American for a Chicago-San Francisco ticket bought seven or 14 days in advance, but American was $5 cheaper on other seats. By Monday afternoon, neither United nor American had rescinded its most recent increases.

''They're not matching fare-for-fare, class-for-class,'' Trippler said. ''The airlines are truly becoming independent in pricing. I never thought I'd live to see the day.''

Airlines say they must raise prices to offset rising fuel costs, a key factor in massive industry losses.

''One would only have to take a look at the cost of fuel to understand why airlines need a price increase,'' said Sarah Anthony, a spokeswoman for Houston-based Continental.

Oil prices broke $57 a barrel Monday before slipping back to $56.30 in midday trading on the New York Mercantile Exchange. That's near record levels, although well below the 1980 inflation-adjusted high of about $90 a barrel.

U.S. carriers spent an estimated $6 billion more for fuel in 2004 over 2003, and analysts have grown more pessimistic about the industry's outlook as prices have continued to climb.

Michael Linenberg, an analyst with Merrill Lynch, said the industry would lose $5 billion this year instead of the $3.4 billion he had been predicting. If oil remains above $50 a barrel, it will lead to bankruptcies or even liquidations, he said.

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