Delta Becomes Latest Airline to Boost Fares
Delta Air Lines, the No. 3 U.S. carrier, said Friday that it had raised round-trip fares on domestic U.S. flights by $10 to offset rising costs, but it's unclear whether the increase will hold as demand softens.
"Last night, Delta increased domestic one-way fares by $5," spokeswoman Betsy Talton said. "Fare increases continue to reflect the increased cost of doing business."
The test of pricing power comes at the start of the seasonally weak fall travel period, when demand generally falls off.
"It is unusual to see attempted increases in this traditionally slower travel period," said Rick Seaney, chief executive of FareCompare.com, which tracks air fares. "This time period historically has been filled with sales, not increases."
The U.S. economy is also showing signs of slowing, which could crimp consumer spending and weaken travel demand. U.S. employers cut 4,000 jobs in August, the first time the economy had shed jobs since August 2003.
Airfare increases have generally struggled to gain hold this year, often being rescinded as competitors balk at matching them.
Leading low-cost carrier Southwest Airlines -- which last week raised one-way fares by up to $10 in a move matched by major carriers and in the past has helped spoil other attempts to increase fares -- currently doesn't intend to match Delta's move, spokeswoman Beth Harbin said.
Published fares are typically changed at scheduled updates, and no rivals had matched Delta's fare increase during the two updates on Friday, according to FareCompare.com.
But some analysts expect that high jet fuel prices, which have risen steadily this year and are up about 15 percent compared with a year ago, will give Delta's increase a decent chance to succeed, though low-cost rivals will likely limit its scope.
"Given the recent 17 cent per gallon rise in jet kero prices, we ascribe a high probability of competitive matching," said JPMorgan analyst Jamie Baker.
But "portions of this increase may ultimately be rolled back, instead sticking only in less relevant markets that lack discounter penetration," he said.
AMR's American Airlines, UAL's United Airlines, Northwest Airlines and US Airways Group all said they were studying Delta's move.