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Latest airfare increase fizzles over the weekend

The airlines' latest effort to broadly raise U.S. fares by $10 per round trip has crumbled.
/ Source: The Associated Press

The airlines' latest effort to broadly raise U.S. fares by $10 per round trip has crumbled as discount carriers like Southwest decided not to raise their prices.

After several successful price increases from December through February, two efforts to raise fares this month have died, raising questions about how much consumers are willing to pay for travel.

United and Continental started the push for another fare increase last week and were joined by Delta, American and US Airways. But low-cost airlines never went along. CEO Rick Seaney said the price hike began to unravel when Delta and American rolled back the increase on some routes. He said United and Continental then gave up and canceled the increases on Saturday.

By Monday afternoon, US Airways joined other large airlines in dropping the fare hike, making the collapse complete.

It's unclear whether consumer demand is too weak to absorb more price increases, or whether the recent failed price hikes are merely a pause before fares rise again heading into the peak summer travel season.

Seaney said domestic price increases will be harder to push through unless they are supported by low-cost airlines — Southwest, JetBlue, AirTran and Frontier.

JPMorgan Chase analyst Jamie Baker said Southwest, which carries the most U.S. passengers and plays a key role in setting fares for the industry, might just be biding its time until Easter. He said Southwest often prefers to raise fares over 3-day weekends to limit press coverage.

Baker said he didn't view this weekend's events as a sign that consumers or corporate travelers won't pay more. He said the airlines are still 9-for-11 with recent fare hikes and have tightened advance-purchase requirements.

Base fare increases don't tell the whole story of airline prices. The airlines still offer sales that often let travelers avoid those higher fares.