U.S. airlines' attempt to increase fares fizzles

NEW YORK Tue Feb 16, 2010 12:56pm EST

Southwest Airlines planes prepare for departure from Oakland International Airport in a file photo. REUTERS/John Gress

Southwest Airlines planes prepare for departure from Oakland International Airport in a file photo.

Credit: Reuters/John Gress

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NEW YORK (Reuters) - U.S. airlines' second attempt of 2010 to raise ticket prices has fizzled, with major carriers pulling back fares over the long holiday weekend, according to Farecompare.com.

Last week, UAL Corp's United Airlines increased fares by $10 per round-trip, and other top carriers followed suit. But by Monday afternoon, most airlines had rolled back their prices, Farecompare.com Chief Executive Rick Seaney said in an email.

"This is (the) second, relatively modest hike to fail this year," he wrote.

Low-cost carriers like Southwest Airlines did not raise fares, which may have hurt major airlines' ability to make the higher fares stick, said Morningstar analyst Basili Alukos.

"There's always a lot of competition," Alukos said. "You've got low-cost carriers preying on weaker legacy carriers to pick up (market) share. I'd attribute the failure of the price increase to that."

In the most recent round of quarterly reports, major airlines said they had seen greater demand, particularly from business travelers, who tend to pay higher prices.

Business traffic rose 1.7 percent in December 2009, the first month of year-over-year growth since May 2008, the International Air Transport Association said on Tuesday.

Still, IATA said evidence suggests some business travelers are increasingly traveling in economy seats, indicating recovery is still a ways off.

"We have to look for new ways to fly in a cost-effective manner," Alukos said of his own company's policy.

The Arca Airline Index rose 1.17 percent in afternoon trading, compared with a 1.28 percent gain for the broader S&P 500.

(Reporting by Deepa Seetharaman; editing by John Wallace)

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