American Airlines Left Hanging on Fare Increase
American Airlines withdrew its latest attempt to raise fares after none of its competitors matched a $10 hike in domestic ticket prices launched by the carrier late Wednesday.
The carrier initiated the nation's seventh fare increase since the beginning of the year, as the industry struggles to offset skyrocketing fuel costs due to unrest in the Middle East. Analysts say the climate is reminiscent of the surge in gas prices last seen three years ago.
"Apparently nobody liked it and by golly we're not going to be the only one out there with higher fares than everybody else," Ed Martelle, spokesman for American, told AOL Travel News.
Analysts questioned whether the industry was about to reach a saturation point with six prior fare increases, however they expected airlines to continue testing the limits of higher ticket prices.
"Back in 2008 when they had to do weekly fare hikes we were in the middle of a global economic meltdown," said Rick Seaney, founder and chief executive of FareCompare.com, tells AOL Travel News.
Seaney said that 2011 is running almost parallel to early 2008 in the patterns of oil prices and airfares. As of yesterday, oil was $104 a barrel, while oil was $105 a barrel on the same day in 2008. As of March 7, 2008, there were seven attempts to hike fares and five were successful, compared with six successful attempts this year.
Besides the $10 fare increase, Seaney noted American also this week hiked fares by $21 roundtrip to Hawaii and Canada.
Helane Becker, senior vice president and aviation analyst at Dahlman Rose, said that other airlines may have balked at matching American's fare increase because the price of oil dropped slightly today.
American Airlines, which recently announced plans to trim capacity, said it understands there are certain levels of elasticity with pricing. The airline has also raised telephone booking fees to avoid hiking fares.
"We believe at this point our customers understand the economics of what's happening," said Martelle.
(This story was updated Thursday.)
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