US Fare Increase Mostly Sticks

November 6, 2007

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A USD$20 increase in domestic round-trip air fares initiated last week by American Airlines remained largely intact on Monday, according to a fare analyst who said the trend to higher fares may be near an end.

American raised its fares to offset the rising price of jet fuel, a major expense for all airlines.

Rival airlines matched, although Continental Airlines later rolled back about 40 percent of the increase in larger city pairs, said Rick Seaney, chief executive of fare tracker Farecompare, in a research note. Northwest Airlines also matched but then withdrew 20 percent of the match.

"I wouldn't be surprised to see one more attempted increase by the end of the year, especially if fuel prices surge," Seaney said. "I do believe with the recent media attention on increases that the airlines are close to the end of the rope with consumers on increases for this year."

The price of jet fuel is directly related to the price of NYMEX crude oil, which notched an all-time high last week above USD$96 a barrel.

Airlines have initiated several fare increases this year to pass on that expense to travelers. Fare increases are successful only if matched by competitors.