Airlines rescind latest round of fare increases

A broad-based fare increase, initiated last week by Delta Air Lines Inc. and matched by U.S. rivals, has unraveled, prompting experts to say Monday that the chances for further fare hikes are fading.

As of Monday morning, even Delta had rescinded the $5 one-way increase, which failed to gain traction among enough airlines to overcome competitive pressures.

Airlines, struggling to offset historically high fuel prices, have raised fares several times in the last year. Experts now say that trend may be coming to a close.

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“This represents the second failure out of three broad-based attempts this year, though failures are reasonably common,” said JP Morgan airline analyst Jamie Baker in a research note.

“That said, the relevance and likelihood of future increases is increasingly debatable, in our view,” Baker wrote.

Delta was the first to try an increase last week. The fare hike was matched by AMR Corp’s American Airlines and UAL Corp’s United Airlines. Those two carriers pulled the increases on Sunday.

Northwest Airlines, which only partially matched the initial fare hike, said it reduced fares Monday.

Another airline expert, Terry Trippler at travel club myvacationpassport.com said he expects the pace of fare increases to slow in 2007. But he still sees fares climbing between 5 percent and 8 percent over the course of the year.

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Higher fares and full planes have bolstered earnings for airlines, helping them out of a severe slump that began in 2001. Low-fare competition in the industry has made it hard for carriers to raise fares enough to cover their expenses.

Airlines complain loudly about the cost of fuel in particular. Although, the price of crude oil — directly linked to the price of jet fuel — is down about 15 percent since February 2006, it remains historically high.