Airlines Delay Scheduled Fare Increase : Postponement Raises Question About Industry’s Ability to Make Hikes Stick

An effort to raise air fares popular with leisure travelers stumbled Friday when Continental Airlines broke ranks and delayed the 2% increase until next week, prompting other carriers to follow suit.

The delay raised more questions about the airlines’ ability to raise fares in a tough economic climate and created confusion for passengers and travel agents. Despite the delay, most industry officials expect fares to rise in the long run.

The 2% hike, which was to have been implemented Friday, had been postponed once before and pared down from an initial proposal that would have raised prices for all travelers.

The increase, limited to discounted tickets purchased in advance, will now be applied to tickets purchased beginning March 14, several airlines said. Along with Continental, other airlines that delayed the increase include United, American and Northwest.

“The airlines have to get their prices up somehow this year, but they are having a hard time doing that,” said Jay Anderson, vice president of the travel agency USTravel in Southern California.

“It causes ongoing confusion to customers,” Anderson said. “They wonder, ‘Should we book our vacations now? Will it (the fare increase) go through?’ So, it does create problems.”

Continental Airlines apparently delayed the 2% increase after Trans World Airlines and America West Airlines declined to go along, analysts said. All three carriers are operating under Chapter 11 bankruptcy court protection.

A Continental spokesman would say only that the postponement was “for competitive reasons.”

Samuel C. Buttrick, an airline industry analyst at Kidder, Peabody & Co., said if the hike goes through and results in a significant drop in demand, airlines may be forced to cut prices later this month.

“This fare hike . . . has achieved less in its initial objective than most other pricing moves have in the past six months,” Buttrick said. “That suggests that, in the short term, you are pressing the outer limit of what the consumer can take.”

Airlines had better luck implementing an increase earlier this year. Led by United Airlines, the industry raised all fares 2% in January in a bid to recoup some of the $6 billion in losses it suffered the last two years at the hands of the recession and the Gulf War.

Airlines also need to pay for billions of dollars in new aircraft over the next decade to expand and modernize their fleets and meet tougher federal noise standards, industry analysts said.

“Over the longer term, in order for the industry to survive, fares are going to have to go up,” said Albert A. DeLauro, director of the transportation practice at Cresap, a management consulting firm.