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Latest Airfare Hike Unravels in Some Markets

Last weeks' $5 increase on domestic air fares eroded further along with the ability of major airlines to pass their high fuel expenses to passengers during the peak summer travel season.

All the major airlines that hiked fares last week have partially rolled back the increases after low-cost carrier Southwest Airlines failed to match, said Neil Bainton, chief operating officer at FareCompare.com.

Continental Airlines, AMR's American Airlines, Delta Air Lines, UAL's United Airlines and US Airways Group all scaled back the increase, Bainton said.

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Airlines must find some way to implement revenue-boosting fare hikes to offset soaring fuel prices, he said.

"They've got to get some pricing strength or firmness going," Bainton said. "Somehow, this has got to stick."

A series of fare hikes seems to have faltered in recent weeks, with one increase earlier this month failing within a few days.

The fare hike was launched last week by Delta Air Lines in an effort to offset soaring jet fuel prices. Rival carriers, such as AMR Corp's American Airlines and Continental Airlines, quickly matched.

But the increase began to unravel on Sunday when American, Delta and United pulled fare hikes on routes that overlapped Southwest's service.

Industrywide fare hikes tend to collapse if they aren't broadly matched. Low-cost airlines like Southwest are the most likely spoilers of fare increases.

Airlines, which are gearing up for the busy summer travel season, have sought to raise fares to offset higher costs of jet fuel, which vies with labor as an airline's largest expense. The price of jet fuel has risen about 17 percent over the last four months.

But softening demand amid a weakening U.S. economy has made it difficult for airlines to pass on these higher costs.

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