Airlines Try Again for Price Increase

With passenger loads up, major US airlines are again trying to push through a small fare increase. We noted a failed attempt at a price increase back in August, when oil prices were higher, but important business traffic was probably softer. Despite the slide in energy costs, airlines says that their fares still have not caught up to oil prices (probably true if you look at the history of ticket prices versus oil prices). Everyone knows this is a pretense, and the real reason for the increase is higher demand.

Notably, American Airlines is not raising fares on critical Dallas routes with competition from Southwest, which does not intend to raise fares. With the relaxation of the Wright Amendment, Southwest will exert increasing downward drag on American’s pricing power.

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