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Discount carriers block effort to raise airfares

Analysts look to Southwest to set tone about further price increases

Southwest Airlines was among the low-cost carriers that didn’t to go along with the latest fare increase of $10. Southwest Airlines was among the low-cost carriers that didn’t to go along with the latest fare increase of $10. (Matthew Staver/ Bloomberg News)
By David Koenig
Associated Press / March 29, 2011

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DALLAS — The airlines’ latest effort to broadly raise US 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.

Rick Seaney, chief executive officer of FareCompare.com, 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 yesterday morning, US Airways was the only one of the major airlines that still had the higher fares.

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.

Jamie Baker, JPMorgan Chase analyst, said Southwest, which carries the most US 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 did not view this weekend’s events as a sign that consumers or corporate travelers will not pay more. He said the airlines are still 9-for-11 with recent fare hikes and have tightened advance-purchase requirements.

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