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The Honolulu Advertiser
Posted on: Wednesday, May 23, 2001

Airlines reverse course on airfare increase

USA Today

Major airlines rolled back fare increases they put in place during the weekend, but airfare experts say another attempt to raise prices may come as soon as this weekend.

America West, American, Continental, Delta, TWA, United and US Airways rescinded a 5 percent increase in business and leisure fares this week after Northwest did not follow.

Analysts expect airlines to try raising fares again soon, but by less than 5 percent this time. Most fare increases are between 1 percent and 3 percent.

"I think it was a case of indigestion," said airfare analyst Bob Harrell of Harrell Associates in New York. "It takes a couple of iterations to get it right."

Airlines surprised some analysts by trying to increase fares when a weaker economy is forcing companies to reduce business travel and some vacationers to put off trips. Most major airlines lost money in the first quarter of 2001 because of corporate travel cutbacks and higher labor and fuel costs.

Higher fares usually paid by business travelers have remained flat since November, Harrell said.

Bestfares.com editor Tom Parsons said leisure fares have not gone up since May 2000.

The Air Transport Association said it expects airline prices will likely rise just 0.3 percent in 2001 compared with 4.5 percent growth last year.

Analysts say airlines have been offering more discounted fares this year to fill empty seats.

Northwest Airlines last week introduced a domestic fare called First Class BizFlex for travelers who buy tickets 14 days in advance and stay overnight any night of the week.

They will be able to travel first class for $50 to $200 more than its BizFlex coach fare, which also must be bought at least 14 days before departure.

Delta matched Northwest's new fares in some markets. American canceled a similar fare it offered for only one day after Northwest's announcement.