Northwest Changes Course, Raises Fares 4%; Others Follow

For months, major U.S. airlines have been champing at the bit to raise leisure air fares and take advantage of strong demand for domestic airline tickets that has filled the nation’s jetliners to near capacity. On Tuesday, they got their wish.

After scuttling six previous price hike attempts this year by major U.S. carriers, Northwest Airlines decided to lead the charge, raising fares on advance-reservation tickets by 4%. Other U.S. airlines quickly followed suit, resulting in the first such hikes since December.

Although the move is expected to take a bite out of the wallets of leisure travelers, industry analysts said it is a natural price adjustment given the strong, steady demand for domestic air travel.

“We have been carrying a strong passenger load all summer long,” United Airlines spokesman Joe Hopkins said. “Advance booking leisure fares have not increased in quite a while.” He said United took the cue from Northwest and matched the 4% increase.

Consumer demand for domestic air travel in the first seven months of the year filled airplanes to 71.3% capacity, according to industry analysts. As far as the airlines are concerned, there is room to raise rates and not see a decrease in ticket purchases.

St. Paul, Minn.-based Northwest refused to comment on its change of heart Tuesday, but analysts speculated that the carrier anticipates a quick resolution to its current contract dispute with pilots and is attempting to recoup revenue lost this summer when passengers opted for other airlines not threatened with a potentially crippling strike.

“The only thing that would make management put this fare increase into effect is they must know full well there is not going to be a strike,” said Terry Trippler, editor of Airfare-Report newsletter based in Minneapolis.

Also raising their domestic prices Tuesday were United Airlines, American Airlines, Continental Airlines, Delta Air Lines, Trans World Airlines, US Airways and America West. It marked the first across-the-board increase by all major domestic airlines since Dec. 31, according to Tom Parsons, publisher of Best Fares consumer newsletter.

Northwest’s move came just one day after American backed off from its own 4% price hike attempt launched last week. Most major airlines embraced the increase, but Northwest balked.

Northwest was also the main culprit in thwarting five other fare increases attempted since April. But on Tuesday, the company changed course.

“The other major six airlines are dancing in the clouds,” Parsons said. “They have been fighting for a fare increase like crazy.”

Most airline stocks rose on news of the fare hikes. On Nasdaq, Northwest stock added 50 cents to $30.50.