UPDATE 2-U.S. airlines withdraw fuel fee increase

(Adds United and Continental rolling back; share prices)

By Chris Reiter

NEW YORK, Jan 22 (Reuters) - Major U.S. airlines on Tuesday rolled back a fuel surcharge increase aimed at offsetting soaring oil prices as consumers balk at higher fares, and worries over the health of the economy grow.

American Airlines, United Airlines, Delta Air Lines Inc (DAL.N: Quote, Profile, Research), Continental Airlines (CAL.N: Quote, Profile, Research), and US Airways Group Inc (LCC.N: Quote, Profile, Research) all rolled back the increase on Tuesday. Northwest Airlines Corp (NWA.N: Quote, Profile, Research) withdrew the increase on Monday, according to fare tracker FareCompare.com.

AMR Corp's (AMR.N: Quote, Profile, Research) American Airlines initiated the increase last week, doubling its domestic fuel surcharge to $40 per round-trip fare, except in markets where it faces low-fare competition.

Northwest backed off the increase because of limited initial matching by Continental, a company spokesman said.

"It's basically failed," Rick Seaney, chief executive of FareCompare.com, said of the latest increase. "It doesn't surprise me at all with all the economic bad news the last few days."

The aborted increase marks the second failure to raise ticket prices in as many weeks as fears the U.S. economy is on the verge of recession mount.

A fuel surcharge increase initiated by UAL Corp's (UAUA.O: Quote, Profile, Research) United Airlines the previous week was withdrawn after rival carriers failed to support the $50 fee.