Delta rolls back $10 fare hike on some routes

[canyonblue]

Delta rolls back $10 fare hike on some routes


04:17 PM CDT on Monday, September 10, 2007
Bloomberg News

Delta Air Lines Inc., the third- largest U.S. carrier, rolled back a $10 round-trip fare increase on about 25 percent of its U.S. routes, an airfare analyst said.
Other major carriers that had initially matched Delta's higher prices over the weekend also rescinded some of their increases, said Rick Seaney, chief executive officer at FairCompare.com.

Lower-cost airlines such as Southwest Airlines Co. and AirTran Holdings Inc. never matched Delta's move.

"Delta is getting nervous, but that doesn't mean they will roll back the increase everywhere," said Seaney, whose Dallas-based Web site tracks fare changes. "At least 50 percent of the people buying tickets now are paying $10 more than a week ago."

Airlines often raise fares and are forced to lower prices when competitors don't match the increase. Delta's move Sept. 7 was the 10th attempt at a broad fare increase by a U.S. carrier this year, analyst Jamie Baker at J.P. Morgan Securities Inc. said Monday in a note to investors.

Four of the price hikes succeeded.

Delta doesn't comment on its pricing strategy, spokeswoman Betsy Talton said.

Northwest Airlines Corp. and UAL Corp.'s United Airlines raised fares on more than 75 percent of their routes, Seaney said.

Southwest, the largest discount carrier in the U.S., led a fare increase over the Sept. 1 weekend that boosted one-way tickets by as much as $10 to help offset rising fuel and labor costs. Seven other carriers followed suit.

"Investors can count on Southwest continuing to behave in a manner that helps, not hurts, industry pricing," Baker said in his report.

 

[pilotyip]

Can not raise prices

Shows the elasticity of supply and demand. The airline knows instantly with a drop off in booked seats the price increase will decrease revenue. For those who just raise prices and pay us more, it could lead to fewer jobs, longer upgrades, and a smaller airline.

 

[FlyingSig]

The real guage will be if SWA rolls back their increase as well.... if they do that will be the first time in a long time that SWA didn't dictate market price and that another airline forced SWA to play the price game they were so good at during the downturn.

 

[canyonblue]

The real guage will be if SWA rolls back their increase as well.... if they do that will be the first time in a long time that SWA didn't dictate market price and that another airline forced SWA to play the price game they were so good at during the downturn.

The big difference is, we didn't have a downturn. But we do need to charge more to help offset rising fuel and labor costs. I guess nobody else has those problems.

 

[Twotter Driver]

I do not work for SWA, but I truely beleive the reason they have made money for so long, 30+ years, is the fact they charge what they need to in order to make money. If labor / fuel costs increase, they increase the price of the ticket. Pretty simple in my opinion. Those that think that Southwests day is comming are dreaming. Yes, they too will pay market price for fuel and will make money doing so. There managment is in the business of making money, and if it means eliminating unprofitable routes and or raising ticket prices they will. Its too bad that other airline managment teams aren't as smart as SWA's. They know how to run a successfull business and will continue to do so.
They have had the competitive edge for quite some time now, and will continue to raise ticket prices accordingly as fuel and labor costs go up. The legacies and others will follow suit and will hopefully continue to post large profits. I think SWA raising prices is a good thing, which in the long run will result in the entire industry charging a fair market price for what it should cost to fly from point A to point B.

 

[pilotyip]

Shrinking to profitable routes.

SWA is no longer the automatic go to for a low price ticket, you can beat them on other airlines. As they raise prices to cover costs and shead unprofitable route, they will become a smaller airline. The means buying fewer airplanes, delaying classes and upgrades. In 25 years following this buisness practice of shriking to be profitable they will have three routes, DAL-HOU-SAT and three airplanes. As a footnote since 2000 SWA percentage of revenue for employee compensation has gone from 35% to 42%. That is 7% off the bottom line.