AA Tries Fresh Fare Hike - 2004-09-22

American Airlines today raised by $10 most domestic and Canadian roundtrip fares. The pricing action is the latest attempt by a major U.S. carrier to offset persistently high fuel costs. The price of a barrel of crude oil on the New York Mercantile Exchange this afternoon was again on the rise, jumping well over a $1 to surpass $48. The next few days will determine whether or not AA's competitors match the hike.

With low-cost carriers controlling more industry pricing power and some major carriers unwilling to become less competitive in certain markets, many earlier price increases this year failed to stick. Analysts and industry observers, however, have suggested that low-cost carrier prices will begin to creep upward. AirTran, for example, last week raised fares $5 each way, "representing its fourth system increase this year," said J.P. Morgan Securities analyst Jamie Baker.

Many airline executives do not expect oil prices to remain quite so high, even as they acknowledge that their companies must adjust to new realities. "Our expectations, for planning purposes, is that fuel prices will be right around $40 for a year and then reach a level near $35," said Delta Air Lines CEO Gerald Grinstein, during a press briefing last week in New York.