Major U.S. airlines have launched a $10 round-trip domestic fare increase, marking the fifth industrywide fare hike in 2009 and possibly signaling new pricing power for airlines as they claw their way out of an economic downturn.
The increase, initiated earlier this week by Delta Air Lines and Continental Airlines, is the second hike in two weeks and has been matched by all network carriers, said Rick Seaney, chief executive of Farecompare.com on Friday.
The bottom line is that we hit the bottom and it's starting to come off the bottoms, and pricing power is shifting, Seaney said. The pendulum is shifting away from the consumer and back into a neutral position.
Seaney said he is waiting to see if low-cost carriers like Southwest Airlines and AirTran Airways also match the increase.
The airline industry has been battered in recent years by low-fare competition and volatile fuel prices. The economic recession that started in 2008 has eroded travel demand and forced carriers to slash capacity.
Airline executives said this week that they have seen signs of returning demand. Increased demand could give carriers a foundation for more fare hikes.
Certainly the high load factors and the success that we've had with demand gives us a lot more confidence in pushing through some very modest fare increases, said Laura Wright, Southwest's chief financial officer, on a conference call with analysts this week.
Seaney said there were 15 fares hikes initiated and broadly matched by U.S. carriers in 2008 and 17 such increases in 2007.
The Arca airline index was down 1.51 percent on Friday.
(Reporting by Kyle Peterson, editing by Dave Zimmerman and Matthew Lewis)