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The Honolulu Advertiser
Posted on: Tuesday, August 22, 2006

Airfares may have peaked, temporarily

By Trebor Banstetter
McClatchy-Tribune News Service

FORT WORTH, Texas — After months of steady increases, airline fares may have finally peaked — at least for a while, some experts say.

A fare increase implemented Friday by several airlines was dropped over the weekend when the entire industry failed to sign on.

That increase, which was aimed at business travelers, raised prices by $10 on round-trip tickets.

"It was rescinded for competitive reasons," said American Airlines spokesman Tim Wagner.

Most recent increases have stuck, as carriers struggle to compensate for the high cost of jet fuel. Heavy demand for travel this summer, coupled with cutbacks in domestic flights, has also given airlines leverage to charge more.

Airline ticket prices are up 10 percent this year, according to the U.S. Department of Transportation.

But airline analyst Ray Neidl of Calyon Securities said yesterday that fare prices may stabilize now that carriers are moving into the traditionally weaker fall months.

"Fare hikes might be over for the short term as airlines examined how the fall traffic was holding up," Neidl told investors in a report. "Evidently, most airlines agree with the assessment of a weaker fall (travel) period."

But analyst Jamie Baker of J.P. Morgan Securities said that he wouldn't be surprised to see another attempt to raise fares in the near future.

"Look for another attempt in coming weeks, in our view, though one affecting all fare categories equally" rather than just business travelers, he wrote in an investment report.

Neidl said prices going forward would most likely depend on the demand for travel in the latter part of the year.

"If demand holds, we expect we will then see some further price increases at that time," he said.