Delta's airfare increase sticks; Competitors, including Southwest, match hike
Looks like airfares will be climbing again this year.
In the first effort to boost fares this year, U.S. airlines have increased prices on long domestic trips by as much as $20 round trip.
Last year, after a two-year lull, airlines made 22 attempts to raise fares, nine of them successful. Round-trip domestic airfare increased by as much as $80 in 2011, compared with $50 in 2010 and $60 in 2009, according to fare-tracking site FareCompare.com.
This time, Delta made the first move Wednesday, increasing fares by $10 each way on routes longer than 1,500 miles. United-Continental Airlines, American and US Airways confirmed on Thursday that they matched the increase on their longer-haul routes.
And in a sign that the fare move is likely to stick, low-cost carrier Southwest-AirTran also followed, with a $10 fare increase each way on routes longer than 1,500 miles. According to FareCompare.com, low-cost carrier Frontier Airlines also matched the increase.
"We're still really battling high fuel prices," says Southwest spokeswoman Katie McDonald. "Any kind of increase we take is specifically to combat the high cost of fuel."
Fare increases often don't last, because carriers don't want to price themselves too high above their competitors. But a low-cost carrier matching usually makes a fare increase easier for the major airlines to justify.
Most carriers declined to comment on pricing strategy, but they've long been complaining about higher fuel costs. To offset that, they've cut back on flights or the seats they make available. That's made it easier for them to charge more and post a profit. Airline mergers have also helped reduce competition, giving consumers less choice. The result: fuller planes at higher prices.
The increase comes as consumers and companies remain cautious about spending on both leisure and business travel amid global economic uncertainties.
The airlines were most successful at raising fares in the first half of last year, but Southwest blocked the last five attempts by refusing to go along, according to research by analysts at JPMorgan. Up until this week, Southwest had not had an across-the-board fare increase since mid-October, though it had made a few small, strategic increases in unique fare categories, the analysts say.
"In our view -- at least for now -- we would disagree with any suggestion that Southwest management (or its pricing department) is otherwise asleep at the switch. On the contrary, the opposite increasingly appears to be true," the analysts wrote on Thursday.
Rick Seaney, chief executive officer at FareCompare.com, says he expects domestic carriers to continue to try boosting prices every couple of weeks in the first half of the year with limited success.
"I think the main reason is that airlines have no choice but to fill up historically empty middle seats with folks who have much thinner wallets than they did before the recent recession," he says.
Copyright 2012 Gannett Company, Inc.All Rights Reserved