Air fare hikes falter, but demand remains strong

CHICAGO (Reuters) - Major U.S. airlines on Tuesday partially withdrew last week's flurry of fare increases, but one analyst said the fare hikes have been uncommonly successful and suggest robust travel demand this fall.

"En masse this morning they all were decreasing fares. (But) to some degree their increases have stuck pretty well," said Rick Seaney, chief executive of fare tracker FareCompare.com.

Seaney said UAL Corp's United Airlines and Continental Airlines both rolled back more than 10 percent of the increases announced last week.

United raised fares last week following fare hikes by Delta Air Lines and low-cost carrier Southwest Airlines. In each case the increases were largely matched by rivals.

The airline industry, battered in recent years by competition and soaring costs, in 2006 began managing capacity more strategically and boosting fares.

The trend toward higher fares continued in 2007 but slowed somewhat. Seaney said the increase of fares after the peak summer travel season bodes well for airlines as they enter the weaker months of their annual business cycle.

"It's very unusual to see these kinds of things," he said.

"I'm positive that they are feeling pretty confident about demand. They have it to the point where they have an advantage over the consumers," Seaney said.

Airlines share were broadly higher in early trading. The Amex airline index was up 1 percent.