Several big U.S. airlines have abandoned their most recent attempts to raise prices for last-minute business travelers, it emerged on Monday.
Continental, Northwest, United and a handful of other legacy carriers raised prices for one-way walk-up fares, commonly used by business travelers, on certain routes by $10 to $509 late last week. But they retreated at the weekend after Delta, which imposed a $499 cap on walk-up fares in January, failed to match its rivals' price increases on all but a handful of flights.
The failure by the leading U.S. legacy carriers to raise prices on some of their most profitable routes further underlines the airlines' lack of pricing power in the face of intense competition from low-cost rivals.
U.S. legacy carriers have launched several attempts to raise prices this year, but an overabundance of available airline seats and fierce price competition from low-cost carriers have made it difficult for airlines to make those price increases stick. Northwest earlier last week abandoned the most ambitious attempt to raise prices this year, after rivals failed to go along with a $50 per ticket increase on some business flights.
The situation has left legacy carriers struggling to stay afloat as rising fuel prices and massive pension liabilities drain their cash reserves. Bob Harrell, an airline consultant, said there was little indication that the airlines would be able to raise rates in the near future. "Until the low-cost carriers start filling up their seats or 20 percent of capacity drops out of the market, they are going to have difficulty moving fares up," said Mr. Harrell.
The industry's woes were reinforced on Monday after American Express, one of the biggest providers of business travel services, said that average domestic airfares for routes in the U.S. dropped to a five-year low in the first quarter. American Express said that the average "one-way" airfare paid by its business travel customers fell to $202 in the first quarter, from $234 in the first quarter of 2004. International airfares rose slightly over the same period, American Express said.