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Airlines Begin Scaling Back Fare Increases

U.S. airlines have begun to withdraw a revenue-boosting fare increase initiated last week by Delta Air Lines, but it is too soon to say whether the bulk of the increase will last, a fare tracker said Monday.

Even Delta, the No. 3 U.S. carrier, rolled back 10 percent of its fare increase, Rick Seaney, chief executive of FareCompare.com, said in a research note.

Symbol
Price
 
Change
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DAL
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"This activity mostly reflects on the competitive pressures of low-cost airlines, which have not yet joined into the increase," Seaney said.

Delta raised ticket prices last Thursday by $5 each way on domestic routes to offset rising costs. The increase followed one launched by Southwest Airlines, which frequently spoils fare increases by failing to match.

Delta's increase represents a test of pricing power at the start of the seasonally weak autumn travel period, when demand generally falls off.

The airline industry has been battered in recent years by soaring fuel prices and competition. Carriers managed to cut capacity in 2006 and begin a trend toward higher fares. The trend continued, but slowed, in 2007.

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.

Other airlines scaling back fare increases include AMR's American Airlines, Continental Airlines and Northwest Airlines, Seaney said.