Airlines Raise Walk-Up Fares
Jul. 15–Four airlines raised the rates on their highest walk-up fares by $100 each way yesterday, the latest in a series of fare increases aimed at helping the struggling industry keep up with the record-high fuel costs.
Delta Air Lines said it was raising the cost of tickets bought at the last minute, usually purchased by business travelers, by $100 to a maximum of $599 each way. It also raised its cap on first-class fares to $699 each way from $599.
The increase comes after Delta introduced in January “Simplifares,” a simplified fare structure that included capping last-minute fares to help it compete with low-fare competition. As was the case then, several other airlines followed Delta’s lead with United Airlines, US Airways and Continental Airlines raising their fares yesterday.
Airline specialists said the move is significant because it gives the airlines power to charge more for some tickets as they scramble to pay for record high fuel costs. The cost of crude oil, which largely determines jet fuel prices, was just above $43 a barrel when Simplifares were introduced. Crude oil closed at $61 per barrel yesterday.
“That’s a big hit,” to the airlines, said Dan Kasper, managing director and head of aviation at LECG LLC, a Cambridge consulting firm. With higher ticket prices, “they give themselves a little bit of headroom here.”
The airlines that matched Delta’s higher fares said it only applied to routes where they are competitors. But because airlines typically mimic each other’s fare moves and many compete on multiple routes, the increase will in effect be nationwide, aviation specialists said.
The increases come amid a five-year slump rife with heavy losses and bankruptcies. US Airways is in its second Chapter 11 bankruptcy since 2002 and has agreed to merge with America West Airlines. United Airlines has been under bankruptcy protection since 2002, and Delta has warned that it could be facing a Chapter 11 filing if it does not drastically cut more costs.
In a report issued yesterday, analyst Ray Neidl of Calyon Securities in New York wrote that Delta “has finally caved into reality and is raising fares and caps due to higher fuel costs.” Still, the airline is at significant risk of a bankruptcy filing this year, he wrote.
United matched Delta’s fare cap increase, and United spokeswoman Robin Urbanski said the carrier, like Delta, is trying make up for the high cost of fuel. The increases won’t affect United’s fares on routes where it doesn’t compete with Delta, she said.
“This would affect only the last minute walk-up business traveler,” she said. “It’s mostly due to fuel and we hope that most of our customers understand. We need help recouping our costs.”
After years of attempted fare increases that frugal passengers routinely rejected, some airlines have seen more success this year.
Most of the major airlines raised their fares by $5 one way and $10 round trip in late June, matching a move by American Airlines. United and Northwest Airlines tried a 3 percent fare increase at the same time, but pulled back in favor of smaller increases its competitors took.
In early June, Northwest sought a $50 each-way increase on its most expensive walk-up fares but quickly scuttled the plan after other airlines failed to match it. Typically, if an airline raises prices and it’s not matched by competitors, the airline will back down. Northwest spokesman Kurt Ebenhoch said the airline was studying Delta’s move but had not decided whether to match it.
American spokesman Ned Raynolds declined to comment on the company’s fare plans. “We constantly monitor what’s going on in the marketplace, and we want to be competitive in the marketplace,” he said.
Kasper, the LEGC analyst, said yesterday’s increases have a better chance of sticking than past ones, because it comes at the height of a summer travel season in which airlines are seeing more passengers than they have in several years. Stong demand typically bolsters fare increases, he said.
“That is normally the time when you can expect prices to go up,” Kasper said. “It’s not that there are a lot of empty seats out there to be had.”
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