Airlines Boost Fares 10% as Renewed Tax Looms

Major U.S. airlines are testing the market with higher fares as they raise domestic fares 10% and consider passing along the renewed 10% federal passenger excise tax.

“The next several days will be very critical on whether airlines get a winning bonanza or not,” Julius Maldutis, an airline industry analyst with Salomon Bros., said Monday.

United and Northwest raised their base U.S. fares Friday by 10%, following the lead of Continental, which raised fares Thursday.

The 10% excise tax on air fare lapsed Dec. 31 but will be reinstated as part of the minimum wage bill President Clinton is expected to sign today.

Airlines have reaped a bonus this year by keeping much of the excise tax money that would normally go to the federal government, analysts said.

The question now is whether airlines will tack the 10% tax on to the 10% hikes in domestic fares or absorb all or part of the tax themselves.