The latest attempt by domestic carriers to raise fares failed to stick early this week, according to analysts, following a string of price hikes during the past few months. This most recent attempt, a modest $5-to-$10 increase initiated late last week by United, which would have been the industry's eighth broad fare hike this year, "fell apart yesterday when the low-cost carriers elected not to match," said The Benchmark Co.'s airline analyst Helane Becker, in a research note this morning.
This failure at least temporarily breaks improving industry revenue trends. Continental Airlines, for example, last week estimated strong unit revenue growth in May--between 8.5 percent and 9.5 percent versus last May--and partially attributed the jump to "the impact of recent domestic fare increases."
Those published price hikes have led to higher costs for corporate travel purchasers, according to Topaz International, an airfare auditing and benchmarking company. In its Monthly Airfare Index, Topaz said the average cost per domestic passenger name record of audited companies was $550 in May, up nearly $75 from April. Average costs per domestic segment, per domestic mile and for international flights similarly were higher in May.
Some analysts suggested heavy passenger demand would further drive fare hikes in the coming months, which in turn could help some carriers regain profitability. J.P. Morgan Securities analyst Jamie Baker, however, said Delta Air Lines' $499 cap on one-way fares--implemented as part of the carrier's airfare simplification
(BTNonline, Jan. 5)--"will eventually need to rise for future broad industry fare increases to occur."