Airlines Reverse Fare Hikes Amid Industry Competition

Strategic Insights -

In a strategic move to maintain market competitiveness, several major U.S. airlines have reversed their recent attempts to raise leisure fares by 4 percent. This sudden change comes on the heels of Northwest Airlines Corp. and Trans World Airlines Inc. refusing to comply with the proposed price hike, which was initially announced by American Airlines on Sunday. The decision to revoke the higher fares is attributed to "competitive action taken by others," according to American Airlines Spokesman Tim Smith.

Key Takeaways:

  • American Airlines abandoned its attempt to raise leisure fares by 4 percent after Northwest Airlines Corp. and Trans World Airlines Inc. refused to go along.
  • The decision to revoke the higher fares was attributed to "competitive action taken by others" by American Airlines Spokesman Tim Smith.
  • Delta Air Lines Inc. and Continental Airlines Inc. lowered prices on Saturday, with US Airways Group Inc. following suit on Monday.
  • This reversal marked the third week in a row that major U.S. carriers raised fares late in the week only to revoke the increase on Monday.
  • Airlines have tried and failed six times to raise fares this year due to record passenger traffic and strong advance bookings.
  • American Airlines raised its prices late Thursday on advance-purchase tickets to all U.S. cities except Detroit, Minneapolis, and Memphis, Tenn.
  • Delta, Continental, and US Airways posted similar increases on Friday, while United Airlines raised fares only on tickets bought seven days in advance.
  • Trans World Airlines Inc. Spokesman Mark Abels stated that the airline would not participate in attempts to capitalize on a potential Northwest Airlines strike by raising fares.

Statistics:

  • Major U.S. carriers have tried and failed six times to raise fares this year.
  • Record passenger traffic and strong advance bookings have driven airline efforts to increase prices.
  • American Airlines revoked its higher fares on Monday, reversing its decision from just two days prior.
  • Delta, Continental, and US Airways lowered prices on the same day, while US Airways Group Inc. followed suit on Monday.
  • United Airlines raised fares only on tickets bought seven days in advance.
  • The third week in a row that major U.S. carriers raised fares late in the week only to revoke the increase on Monday.

Sources:

  • American Airlines Spokesman Tim Smith's statement
  • Northwest Airlines Corp. and Trans World Airlines Inc.'s refusal to raise fares
  • Mark Abels, Trans World Airlines Inc. Spokesman