Major U.S. Carriers on Board for $20 Fare Hike

After a weekend of indecision, the largest U.S. air carriers by Monday had joined ranks behind a $20 increase in advance-purchase tickets favored by vacationers.

Continental Airlines made the first move late last week, saying it needed to raise fares to offset higher jet fuel costs. It was quickly joined Friday by Delta Air Lines Inc., America West Airlines and on Saturday by AMR Corp.’s American Airlines, the nation’s No. 2 carrier.

The largest carrier, UAL Corp.’s United Airlines, raised its fares Saturday but backed down Sunday night when the Minneapolis-based Northwest Airlines balked at the increase. By Monday, both airlines had raised fares.

“We rescinded the fare increase last night because Northwest had not matched, and we didn’t want to be out of sync with them,” Joe Hopkins, a spokesman for Chicago-based United, said Monday. “So this morning, we reinstated it.”

Continental also tried to raise business-class fares--more-expensive seats sold without an advance-purchase requirement--but other major airlines had refused to go along.

While the largest carriers were on board, USAirways Group Inc. and TWA Corp. had reversed increases in excursion fares--typically requiring a seven-, 14- or 21-day advance purchase--as of midday Monday. Discount carrier Southwest Airlines said it did not plan to raise prices.

The major carriers’ increase of $20 applies to round-trip flights of more than 500 miles, with shorter flights increasing $10.

Tom Parsons, editor of Bestfares.com, an Internet site that sells discount travel tickets, said that despite collapse of the business fare hike, there was a 98% chance the leisure-fare increase would stick.

“This is the only business I know where people raise prices to be competitive,” Parsons said. He said five rounds of fare increases this year have added 14.5% to 17.5%--depending on the route--to the cost of leisure travel.

Glenn Engel, an airline analyst with Goldman Sachs, was underwhelmed by the fare increase. “It’s irrelevant. Very few tickets are bought at these prices,” said Engel, who calculates that airlines are discounting about 25% to 30% off their base leisure fares in heavily advertised campaigns.

The most recent increase adds about 3% to 7% to the base price of most leisure fares. The impact of the increase is smaller on the most expensive routes, such as Boston-Los Angeles, which rose from $659 to $679, but more on shorter routes such as Dallas-Nashville, up from $340 to $360.

Airline executives said they needed to raise prices to rebuild profits that have been eroded by higher jet fuel costs. Spot-market jet fuel has risen from about 30 cents a gallon to more than 55 cents a gallon this year.