By Christopher Hinton
U.S. airlines on Thursday appeared to be on the verge of a
second successful domestic airfare hike for this year, as sharp
cuts to the industry's seat capacity balances the loss in passenger
demand.
According to FareCompare.com, a travel-discount Web site that
tracks airfares, Delta Air Lines (DAL) matched an attempted airfare
hike made late Wednesday by American Airlines and followed quickly
by United and Continental (CAL).
That leaves just US Airways (LCC), the country's largest
domestic carrier, to follow suit, the Web site said. Rivals have
managed to raise their prices $10 to $20 a round-trip for most of
their domestic routes.
American and United are units of AMR Corp. (AMR) and UAL Corp.
(UAUA), respectively.
The jump in ticket prices is the best evidence yet that airlines
have found a bottom and are looking toward a recovery, said Terry
Trippler of the airline consultancy Trippler Associates.
"The airlines can see 180 days out and they are seeing the
advanced bookings, and this is telling us they are liking what they
are seeing," Trippler said. "They can always pull back, but this
gives them the chance to push the envelope."
The price hike follows a similar move two weeks earlier when all
the legacy carriers participated in raising airfares along with
low-cost carrier Southwest Airlines, according to FareCompare.com
Chief Executive Rick Seaney.
"Airfare hikes the past two weeks have by no means completely
curtailed the flood of cheap airline tickets we saw in first half
of the year, as AirTran (AAI) bucked the trend ... by filing new
market lows on hundreds of city pairs," Seaney said in an
email.
Passenger demand in the U.S. is down sharply from a year ago as
the recession curtailed both leisure and business travel. To draw
in customers, carriers lowered their ticket prices.
In May, the number of people traveling fell 9.5% from a year ago
while the average price to fly one mile fell 17.6%, according to
data provided by the Air Transport Association.
That helped drive down industry revenue by 26% for the month,
the trade group said.
Airline stocks have matched the falloff, with the benchmark NYSE
Arca Airline Index (XAL) down 33% for the year.
Also helping stall the fall in ticket prices has been a jump in
benchmark oil prices, which have more than doubled since February
in anticipation of an economic recovery.
At last check, the forward contract was trading around $70 a
barrel. Some analysts have warned prices above $65 would push
legacy carriers into losses for the year.
Many airlines hoped in January, with oil prices lower and at
one-fourth of last summer's prices, that the lower cost would
offset the drop in demand.
"I have been cautioning consumers for the past month that they
procrastinate on purchasing airline tickets at their own risk - two
airfare hikes in the past few weeks is the strongest signal I have
seen that the bottom is either here or near," FareCompare.com's
Seaney said in an email.
-By Christopher Hinton, 415-439-6400;
AskNewswires@dowjones.com