U.S. air fare increase sticks in most markets
CHICAGO, June 25 (Reuters) - A fare increase initiated last week by Delta Air Lines Inc. (DAL.N) and matched by rivals remained largely intact on Monday but faltered in some markets due to competitive pressures.
On Friday, Delta boosted fares by $5 each way on most domestic routes. The increase was matched by AMR Corp.'s AMR.N American Airlines, Continental Airlines CAL.N and UAL Corp.'s UAUA.O United Airlines. Fare tracker Farecompare.com said Northwest Airlines also matched. But some airlines have begun to roll back increases in markets where they face low-fare competition, suggesting the trend toward higher fares may have lost its momentum.
"At this point there is no indication on whether or not a full rollback is likely to occur," Farecompare Chief Executive Rick Seaney said in a note on Sunday.
The airline industry raised fares several times in 2006 to offset the soaring price of jet fuel. Fare hikes in 2007, however, have been less successful. Airlines were guardedly hopeful that low-cost carriers like Southwest Airlines (LUV.N) and JetBlue Airways (JBLU.O) would not spoil this increase as they have others. Fare increases generally fail without widespread matching.
"We're still working under some very high fuel costs," said UAL spokesman Jeff Kovick. "We will continue to monitor it in the coming days."
The airline industry has been battered in recent years by low-cost competition, which makes it hard for airlines to impose lasting revenue-boosting fare hikes.
Low-cost carriers typically do not match price increases initiated by traditional airlines.
Airline shares were broadly weaker. UAL shares were down 20 cents at $39.17 on Nasdaq. Delta shares were down 37 cents at $19.38 on the New York Stock Exchange. Shares of AMR were up 8 cents at $26.83 on NYSE.
(Reporting by Kyle Peterson)
((Editing by John Wallace; Reuters Messaging: kyle.peterson.reuters.com@reuters.net; e-mail: kyle.peterson@reuters.com; Tel: +1-312-408-8581))
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