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American, Delta airlines hike airfares

Published:Wednesday | February 16, 2011 | 12:00 AM
A specially decorated Delta airplane parked at Sangster International Airport in Montego Bay. Delta and American airlines are the latest carriers to raise fares in February.

Delta and American airlines are raising the price of some tickets favoured by business travellers up to US$120 per round trip.

Fare experts said Delta started the increase on Monday and was matched by American.

It's the second big increase in fares in as many weeks.

Airlines eliminated many flights when oil prices were high and the economy was weak, giving them power to raise fares now that planes are more crowded and travel demand is rebounding.

JP Morgan analyst Jamie Baker said it made sense for Delta and American to target corporate travellers, who are considered less sensitive to price increases.

He said it also might indicate that airlines have raised vacation fares as much as they can without causing a loss of revenue - presumably by hurting ticket sales.

American Airlines spokesman Ed Martelle said the increases covered first-class, business-class and 7-day advance-purchase tickets.

Flights up to 500 miles were boosted US$20 each way, those from 501 to 1,500 miles were raised US$40 each way, and flights longer than 1,500 miles increased by US$60 each way, he said.

"We're responding to the Delta initiative," Martelle said when asked why American, a unit of AMR Corp, was raising prices.

Delta Air Lines Inc did not have an immediate comment.

Last week, United and Continental led an increase of US$20 to US$60 per round trip on pricey tickets typically bought by business travellers. Delta and American both matched that hike last week.

Rick Seaney, CEO of FareCompare.com, said that like last week's increase, the Delta-led boost on Monday was aimed mostly at high-end fares - about US$800 per round trip - that are typically bought by corporate travellers, not vacationers.

Unclear

It was unclear whether other airlines would match Delta and American on the latest increase, which also covered so-called instant-upgrade seats in coach.

Baker said low-fare airlines would not be able to block this increase by not going along with it because the tickets are sold at prices far higher than the discount carriers typically charge.

Airlines also are worried that leisure travel could be hurt if airports are allowed to raise fees on air travellers.

US President Barack Obama's budget proposes to let big airports charge passengers up to US$7 per flight segment, up from US$4.50, to pay for capital projects such as runways.

Baker said the higher charge or a proposed boost in security fees to US$5.50 per segment in 2014 from US$2.50 now could depress airline revenue per seat mile by 1-2 per cent. He said the biggest impact would fall on budget-conscious travellers such as those who fly on Southwest Airlines Co.

A seat mile is an airline industry measure of passenger-carrying capacity - one seat flown one mile.

- AP