Several US Airlines Raise Domestic Fares

May 5, 2007

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Continental Airlines, American Airlines and Delta Air Lines said on Friday they raised fares systemwide on flights in the continental United States by USD$5 each way, a test of industry pricing power ahead of the summer travel season.

Bankrupt Northwest Airlines also raised fares, according to Neil Bainton, chief operating officer of airfare tracker He said United Airlines and US Airways had not matched.

The increases, which come amid predictions of softening travel demand, helped push up shares in US airlines. The Amex airline index rose 1.6 percent.

Continental spokeswoman Julie King said the number 4 US carrier, which initiated the increase, made the move to offset the rising price of jet fuel, which vies with labor as an airline's biggest expense.

A one cent rise in the price per gallon of jet fuel adds about USD$18 million to Continental's cost over the course of a year, she said.

Jet fuel prices have risen about 50 cents, or nearly one third, over the last four months.

The increase of advanced purchase fares and walk-up fares follows two limited fare increases in recent days.

United on Thursday said it raised some business-oriented fares with increases ranging from USD$5 to USD$50 each way, depending on the length of route and the class of service.

Last weekend, Southwest Airlines said it raised prices USD$1 to USD$2 on about 25 percent of its flights.

The fare increases come as air travel demand, which has fueled the industry's fledgling recovery, appears to be faltering.

In recent weeks, airlines including US Airways and Southwest have warned of sluggish revenue and bookings heading into the summer. In April, many US airlines have reported lower load factors - the percentage of seats filled with paying passengers.

The industry has struggled to raise fares this year, with efforts like Continental's often collapsing under competitive pressure.

"All fare increases so far this year have had difficulty sticking with the increases either being partially or completely rolled back," Bainton said.

But this round may have better prospects for success, with summer approaching and fares low, Bainton said. "We are entering the high travel season and overall price levels are below 2006 and 2005 for this time," he said.