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VOL. 127 | NO. 40 | Tuesday, February 28, 2012

Latest Attempt to Raise Airfares Stalls

DAVID KOENIG | AP Airlines Writer

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DALLAS (AP) – Airlines have already imposed two broad fare increases in 2012, but the latest effort to raise prices is stalling.

Low-fare airlines are hesitating to match last week's increase of up to $10 per round trip, led by United and Continental.

Fare trackers said Monday that United and others that raised prices last week were scaling them back, at least on routes where they compete with discount airlines like Southwest. But with jet fuel prices rising, they figure it's only a matter of time before airlines try again to raise airfares.

J.P. Morgan analyst Jamie Baker said he was not surprised that Southwest and others blocked an airfare increase so quickly after a successful price increase just the week before. He also said airlines will be forced to boost prices and possibly reduce passenger-carrying capacity for the second half of 2012, if fuel prices stay at current levels or go higher.

When airlines cut capacity – usually by reducing flights – it can drive prices higher by reducing the supply of seats.

Last week most other big airlines including American, Delta and US Airways, matched the United and Continental increase of $4 to $10 per round trip on many U.S. routes. United and US Airways began rolling back the increases over the weekend, and American, Delta, Frontier and Virgin America began doing the same on Monday, according to Rick Seaney, CEO of FareCompare.com.

Airlines are struggling with jet fuel costs that rise along with the increase in oil prices. Spot prices for jet fuel on the Gulf Coast have increased 13 percent since the beginning of the year, according to government figures.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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