01/08/09, 01:06:25 UTC

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U.S. air-fare increase falters, but shows signs of sticking

reuters.com

An industrywide air-fare increase initiated last week by American Airlines faltered over the weekend, but remained mostly intact on Monday, a sign that the trend toward higher fares still has some momentum.

American, the world's largest airline and a unit of AMR Corp, said its $10 round-trip fare increase on domestic routes was still in place.

Its largest U.S. rival, UAL Corp's United Airlines, said it matched the increase last week, rescinded on Sunday and reinstated it on Monday.

"I believe the American Airlines initiated $10 round-trip increase will, for the most part, end up successful," said Rick Seaney, chief executive at fare tracker FareCompare.com.

The airline industry, recovering from a years-long downturn, has been clawing its way out of the slump with help from capacity cuts and a series of revenue-booking fare increases that started last year.

The trend toward higher fares continued in 2007 but with less gusto as various price increases initiated by individual carriers failed to win matches.

Other carriers that matched the American Airlines fare rise include Delta Air Lines, Continental Airlines and Northwest Airlines. The increased fares often did not apply to routes where major carriers face competition from low-cost rivals.

Airline stocks were broadly weaker on Monday, with AMR down 94 cents at $24.20 on the New York Stock Exchange. UAL shares were down $1.97 at $45.85 on Nasdaq.

Continental shares were down $1.89, more than 5 percent, at $32.25, also on NYSE.

Calyon Securities airline analyst Ray Neidl linked the sector decline to concerns that the fare increase will not last. Other pressure on the stocks came from a spike in the price of NYMEX crude oil futures to a record high, he said.

Oil, which is directly linked to the price of jet fuel rose $1.31 to $85 a barrel in morning trading.

 Printable Version  | published Oct 15, 2007