Dallas – Southwest Airlines Co. raised most of its fares by $1 to $10 each way over the weekend, and many competitors quickly matched the move.
Southwest, which boasts about low fares, said it marked its second increase this year after six fare hikes in 2006. An analyst for JPMorgan Chase & Co. said, however, that it was Southwest’s fourth increase this year.
The increases, which began showing up Friday, ranged from $1 each way on flights of under 500 miles to $10 on walk-up fares for flights longer than 1,250 miles, said Southwest spokeswoman Beth Harbin.
“It’s still about cost,” Harbin said. “Fuel prices are still extremely high, and we’re making modest adjustments to cover those costs.” Jamie Baker, an analyst with JPMorgan, said the fare hikes would improve Southwest’s revenue per passenger miles flown, an important measurement in the airline industry. He noted that the increase came soon after Continental Airlines Inc. and US Airways Group Inc.
talked about improving demand for air travel.
Most of the big, older airlines matched Southwest’s fare increases. A competing low-cost carrier, US Airways, also matched, a spokesman said today.
The impact of fare hikes by many carriers have been blunted by frequent discounting. But Baker said that when Southwest pushes fares higher, “we do sit up and take notice and expect the market to do the same.” Fare increases can fail if any of the major airlines refuse to go along because other carriers don’t want to be left charging a higher price.
Tom Parsons, who operates the travel Web site, said demand for travel was so strong that higher fares weren’t hurting ticket sales – at least during the peak summer season.
Parsons said discounts are starting to show up for travel in late August and September, such as sub-$200 roundtrip fares from the West Coast to the Bahamas, about half the usual price. He predicted we’ll soon see cheaper fares from the Midwest and East Coast to Florida.
Southwest remained profitable during the airline industry slump that began in early 2001, but executives are worried enough about future growth to scale back fleet-expansion plans and tweak the flight schedule.
Chief Executive Gary Kelly said recently that profit will grow 6 percent this year, down from a previous forecast of 8 percent. He said that with signs of a slowing economy, the Dallas-based carrier needed “to take less risk and grow more slowly.”
