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Six of the largest U.S. airlines raised some fares $50 each way, renewing their effort to offset record spending on jet fuel and return the industry to profit.
American Airlines, United Airlines, Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Corp. and US Airways Group Inc. increased prices for U.S. first-class and last-minute coach tickets. Southwest Airlines Co. was the only carrier among the U.S.'s seven largest that didn't go along.
The airlines are raising fares at the fastest pace since 2001 to offset fuel prices that have more than doubled. They're also dropping unprofitable routes and shrinking fleets to try to end more than $40 billion in losses in the past five years.
``Constrained supply has provided support for numerous industry fare increases in response to ever-rising energy costs,'' Michael Linenberg, a New York-based Merrill Lynch & Co. analyst, said in a report today. ``As a result, top-line growth is more than offsetting rising energy costs.''
Linenberg said he expects U.S. airlines to have a combined profit of $600 million this quarter. The industry's last full- year profit was 2000.
Airlines have now raised prices across their networks at least seven times in 2006, said Susan Donofrio, a New York-based Cathay Financial analyst. Fares through April, the latest data available, have climbed 11 percent over a year earlier for the fastest increase since 2001, according to the Air Transport Association, the airlines' Washington-based trade group.
The fares involved in today's increase have risen twice, for a total of $100 each way, since April.
Thanks to strong travel demand and reductions in airline capacity, the carriers are filling 85 percent of their seats, the highest since modern jet aircraft entered commercial service in 1954.
Delta's increase is the third time it's boosted its highest one-way fare since restructuring pricing in January 2005 to lower fares and encourage business travel. The most expensive fare now is $699 one way for coach and $799 for first class, spokeswoman Gina Laughlin said. Each is up $200 from the original price. The last-minute coach tickets generally are purchased by business travelers.
In raising fares, the bankrupt carrier ``is continuing to respond to increased cost pressures on our business,'' she said. ``Fuel is certainly continuing to be one of the highest cost pressures we face.''
U.S. airlines are expected to spend $38.4 billion on fuel this year, up from $33.1 billion in 2005, according to the Air Transport Association.
Kelly said Dallas-based Southwest is trying to limit fare increases. Southwest, which has posted quarterly profits since 1991, hedged part of its fuel costs at below-market levels through 2009 when money-losing rivals lacked the cash to do so.
With fewer seats available across the industry, the larger carriers say they now can keep raising fares that had been held down by competition from low-cost airlines.
Higher prices haven't discouraged business or leisure travelers, passenger-advocacy groups and travel advisers said.
``Planes are going to be fuller this July than any July in history,'' said Tom Parsons, a consultant for online travel agency bestfares.com. ``The demand is there and people are willing to pay for it.''
Airlines could boost business fares about another 18 percent before nearing their 2000 peak, said Kevin Mitchell, chairman of the Radnor, Pennsylvania-based Business Travel Coalition, which represents corporate travel managers.
With fare increases so pivotal to airlines' recovery, the ``greatest threat'' would be a drop in travel demand if rising crude oil prices and interest rates slow the economy, said Philip Baggaley, a Standard & Poor's analyst in New York.
Chicago Tribune
Price increases. It never seems to stabilize for more than a few months.
Posted by: Greg | June 16, 2006 7:35 PM | Permalink to Comment