US Airlines' Attempt To Increase Fares Fails

February 16, 2010

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US airlines' second attempt of 2010 to raise ticket prices has fizzled, with major carriers pulling back fares over the long holiday weekend.

Last week, United Airlines increased fares by USD$10 round-trip, and other carriers followed suit. But by Monday afternoon, most airlines had rolled back their prices, Farecompare chief executive Rick Seaney said in an email.

"This is (the) second, relatively modest hike to fail this year," he wrote.

Low-cost carriers such as Southwest Airlines did not raise fares, which may have hurt major airlines' ability to make the higher fares stick, said Morningstar analyst Basili Alukos.

"There's always a lot of competition," Alukos said. "You've got low-cost carriers preying on weaker legacy carriers to pick up (market) share. I'd attribute the failure of the price increase to that."

In the most recent round of quarterly reports, major airlines said they had seen greater demand, particularly from business travellers, who tend to pay higher prices.

Business traffic rose 1.7 percent in December 2009, the first month of year-on-year growth since May 2008, the International Air Transport Association said on Tuesday.

Still, IATA said evidence suggests some business travellers are increasingly travelling in economy seats, indicating recovery is still some way off.

"We have to look for new ways to fly in a cost-effective manner," Alukos said of his own company's policy.