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Airlines reinstate fare hikes

Airlines that cancelled their fare hikes on Monday reversed their decision Tuesday and reinstated the price increase.
/ Source: The Associated Press

Fasten your seat belts. Airlines moved closer to raising domestic fares on Tuesday after a frenzy of raising, cutting and re-raising prices.

If they stick, the latest increases would be the third in less than a month, for a cumulative jump of $30 or $40 on some domestic round trips. Carriers say they must charge more to cover the rising cost of jet fuel.

Years of bruising fare wars have also taken their toll on airline revenues. An industry group, the Air Transport Association, said despite more traffic, revenue as a ratio of capacity fell 1.6 percent in February compared to a year earlier at the largest airlines, adding pressure on carriers to raise fares.

Delta Air Lines Inc., which over the weekend raised prices on many domestic flights by $10 per round trip to match an initial move by Continental Airlines Inc., dropped the increases Monday.

On Tuesday morning, Delta reversed course and pushed prices higher. That had a domino effect on other carriers.

"We're back in," said Sarah Anthony, a spokeswoman for Continental, which responded to Delta by raising its fares back up by $10 per round trip on Tuesday.

American Airlines, the largest U.S. carrier, Northwest Airlines Corp., and US Airways Group Inc., which had dropped their weekend increases on Monday night to match Delta's retreat, also reinstated the $10 increases on many U.S. flights on Tuesday.

"We reinstated it today, and it looks like a number of others are doing the same thing," said Tim Smith, a spokesman for American, a unit of AMR Corp. "It's not universal, but it's moving in that direction."

United Airlines also dropped its fare hike overnight but, unlike the other longtime carriers, it had not revived the increase by Tuesday afternoon. "We're still studying it," said Robin Urbanski, a spokeswoman for United, a unit of UAL Corp.

JetBlue Airways Corp. also raised domestic fares $10 per round trip, but some low-cost carriers, including the largest, Southwest Airlines Co., did not. Southwest, which has locked in 85 percent of its 2005 fuel purchases at lower prices, raised fares $2 to $6 per round trip last week.

U.S. carriers spent about $6 billion more for fuel in 2004 than 2003, and analysts predict fuel costs will lead to billions more in losses at the major airlines this year.

Jamie Baker, an analyst with J.P. Morgan, said Tuesday that the latest fare increases are "a step in the right direction" to cope with higher fuel bills.

Oil futures shot past $57 a barrel in trading on the New York Mercantile Exchange. Baker said the latest fare increase, if it sticks, would allow airlines to offset about $5 per barrel of that cost.

This month, Eagan, Minn.-based Northwest led two successful rounds of fare increases, each adding $10 to $20 to the price of many round trip tickets. The increases, however, have not been applied equally in all places, sometimes leading to the unusual situation of major carriers offering slightly different prices for the same trip.