Monday, February 27, 2012

Latest Airline Fare Hikes Stall as Travelers Push Back, But Expect More to Come With Oil Prices Soaring

[Charts: Rick Seaney, CEO]

Airlines are getting very anxious about rising fuel prices, and you probably should too. That's because the domestic system, which is already strained to the breaking point, will suffer even more if air fares shoot up.

And that's what is likely to occur. Remember, the cost of fuel represents more than a third of operational costs for major airlines (36 percent for United, for example).

It's still early in the 29012 airfare game, but airlines keep banging away at it, trying to boost fares. They don't collaborate on setting fares (that would be wrong. don;t you know). Buyt they do like it when competitors fall in line and match the fare hikes.

Today, the indefatigable Rick Seaney, the CEO of, says that last week's latest domestic $4-$10 round-trip fare-hike attempt, the second in two weeks, "is collapsing as signs of weakness over the weekend set off a series rollbacks after several days of tenuously holding on without low-cost airline support."

United, which had initiated the latest round last week, started partially peeling back prices on some routes on Saturday, and then on Sunday rolled back even more, "accompanied by US Airways," Seaney says.

Then today, "American, Delta, Frontier and Virgin America began rollbacks [of last week's fare increases] across their route systems as well," he says, adding:

"Ahead of this collapse..., Southwest raised some routes for travelers buying tickets at the last minute (under 7 days in advance) by $10 round-trip. Typically, these seats are sold to business travelers who pay more than twice the rate of leisure passengers.

"Air travelers are likely to experience a more gradual increase in domestic airline ticket prices than [drivers] at the pump -- at least for the next few months until summer buying frenzy hits -- as carriers continue to meet fairly stiff resistance to higher fares in their quest to recoup fuel costs."

As usual, Rick is on the case.


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