Latest effort to raise airfares fails

Airlines finding it harder to raise fares; another attempted increase collapses

Associated Press

DALLAS (AP) -- The latest effort by major U.S. airlines to raise prices has collapsed, and the pace of fare increases has slowed considerably from the past two years.

Explanations range from the sluggish economy to fear of derailing the proposed merger of American Airlines and US Airways.

This week Delta and United pulled the plug on increases that ranged from $4 to $10 per round trip within the U.S. They retreated after other carriers declined to go along with higher prices.

The major U.S. airlines have tried 10 broad-based fare increases this year, but only two have succeeded and none since April, according to Rick Seaney, CEO of FareCompare.com.

Last year, the airlines raised fares seven times in 15 attempts, and they boosted prices nine times in 22 tries in 2011, Seaney said.

Airlines often cite rising fuel prices when they raise fares. Spot prices for jet fuel rose 15 percent in 2011 and about 14 percent in the first three months of 2012, corresponding with the higher number of fare increases. Fuel prices are up just 3 percent so far in 2013, according to government figures.

Then there is the economy. On Friday, the government reported that employers added 169,000 jobs in August but did less hiring in June and July than had previously been estimated. Taken together, the summer was the worst three-month stretch of job growth in a year.

Such economic uncertainty can hurt demand for travel. After all, many leisure trips can be postponed or canceled. Air travel has been nearly flat so far this year, although Delta and US Airways reported this week that August was slightly better.

Seaney, the fare-watching expert, has another theory for the pause in fare increase: Price hikes could undermine the American-US Airways merger. The U.S. Justice Department is challenging the merger in court, claiming that it will restrict competition and push up prices.

"It will be hard for Delta and United to push through a hike while American and US Airways are embroiled in a court case," Seaney said. "My guess is that neither one of these airlines want to be associated with headlines announcing airfare increases."

Most U.S. airlines are profitable right now. American parent AMR Corp., which is operating under bankruptcy protection, had its best July ever. The industry has recovered from the 2008 recession by limiting seats, which helps airlines raise prices, and by collecting more money from fees to cover services such as checking bags and changing reservations.

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