Airlines Roll Back Fare Increase

By DAVID KOENIG
|  Thursday, Feb 17, 2011  |  Updated 1:00 PM CDT
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Airlines Roll Back Fare Increase

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Major U.S. airlines are rolling back a fare increase of up to $120 per round trip on tickets favored by business travelers.

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Major U.S. airlines are rolling back a fare increase of up to $120 per round trip on tickets favored by business travelers.

Delta Air Lines raised the fares Monday and other major airlines went along. But fare trackers say that US Airways had second thoughts and dropped the increase on Wednesday.

Rick Seaney of FareCompare.com said Thursday that United and Continental then completely rolled back their increases, while Delta and American scaled back their hikes.

Fare increases can fail if a major competitor refuses to go along because other airlines won't risk losing business with higher prices.

The Delta increase applied to some first-class, business-class and high-end economy fares on routes within the U.S. It was the second -- and larger -- increase aimed at business travelers this month. Airlines, which are paying about 50 percent more for fuel than they did a year ago, have also raised fares or fuel surcharges on leisure travelers five times since December.

Jamie Baker, an analyst for JPMorgan Chase, said he was surprised that US Airways blocked the latest Delta increase after first matching it. US Airways did not immediately respond to requests for comment.

Even though the Delta increase targeted corporate travelers who usually worry less about price, Baker said evidence is growing that many passengers may not be willing to pay higher fares. He noted that Southwest Airlines recently blocked a fourth effort to raise fares on its routes after going along with the first three increases.

If fares don't rise further, airlines will need lower fuel prices or reduced capacity to boost their earnings, Baker said.

Airlines usually reduce capacity by dropping some flights. Cutbacks made in 2008 and 2009, combined with rising demand for travel, led to higher fares last year, when most U.S. airlines returned to profitability.

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