Northwest Does Flip-Flop, Rescinds Hike

One day after bowing to industry pressure to increase air fares, Northwest Airlines Corp. pulled a sudden about-face Wednesday and rescinded a 4% price hike on leisure fares that had prompted all other major airlines to raise rates for similar tickets.

The move left many industry observers exasperated. Tuesday’s fare boost itself was a surprise since St. Paul, Minn.-based Northwest had single-handedly thwarted six other industrywide bids to raise fares earlier this year.

To some, Wednesday’s reversal appeared to be a high-profile case of corporate schizophrenia.

“I don’t think Northwest knows what they are doing right now,” said Tom Parsons, publisher of BestFares consumers newsletter. “Right now they are shooting from the hip.”

Analyst Terry Trippler agreed.

“I’ve never seen anything like this,” said Trippler, who publishes his own consumer publication called Airfare-Report. “Who is running the show, if anybody?”

Northwest spokesman Jon Austin said the flip-flop was not accidental, but he had no other comment about why Northwest rescinded the fare increase.

On Tuesday, Northwest, the nation’s fourth-largest airline, decided to boost fares on domestic tickets purchased seven, 14 and 21 days in advance, leading a rush of similar price hikes by all major carriers.

As of Wednesday evening, however, none of the other major airlines had followed Northwest in rescinding the boosts.

“We were puzzled by this,” said United Airlines spokesman Joe Hopkins, who added that United, the No. 1 carrier, had not yet decided whether to scrap its 4% fare increase as well.

Airlines cannot legally agree to raise their fares simultaneously, though they typically follow suit when rivals increase or decrease fares. Unavoidably caught in the middle are consumers.

Travel agent Ada Brown of Seaside Travel in Long Beach predicted Wednesday’s fare reversal would usher in a short-term drop in ticket sales as consumers wait for prices to settle.

“They don’t know what to do right now,” Brown said. “There is total confusion in the marketplace. Consumers don’t want to pay more than they have to.”

But Brown said consumers will ultimately embrace the carrier offering the lowest prices, even at indecisive, labor-troubled Northwest.

“They want the most convenient flights for the lowest prices, and if it happens to be on Northwest, they’ll take it,” she said.

Northwest shares fell $1.50 to close at $29 Wednesday on Nasdaq. News of its change of heart on fares came shortly before U.S. markets closed.

Analysts had expected this latest attempt at raising fares to hold because Northwest was participating for the first time. For months other airlines such as Delta and American had been clamoring for higher fares to take advantage of a strong, steady demand for leisure air travel that has filled the nation’s airplanes to near-capacity.

Analysts speculated that Northwest, which faces a possible strike by its pilots later this month, had quashed previous price hike attempts for fear that higher fares would scare off consumers already leery of flying with an airline threatened by shutdown. The Air Line Pilots Assn. has indicated it is prepared to strike on Aug. 29 and ground the airline unless agreement on a new contract is reached.

Parsons said other airlines may wait for the outcome of Northwest’s negotiations with its pilots before deciding on whether to lower fares. If the pilots strike, Parsons said, there would be no pressure on the other carriers to drop prices because Northwest would be grounded and consumers would have no choice but to pay the higher rates.

Others speculated that Northwest’s move to pull back the increase may have been triggered by community outcry in the company’s hub cities that rely on Northwest for much of their air travel.

Parsons said the hub cities probably were not the only source of consumer backlash. National news reports about the fare increase invariably mentioned Northwest’s labor woes and the impending strike deadline.

“They’re raising fares and here the pilots are getting ready to go on strike,” Parsons said. “Why would anyone ever think about flying Northwest Airlines?”

He thinks the sudden reversal may be a way “to get back in the good graces of the public somehow.”

But Trippler said it might already be too late.

“They could be selling these fares for five bucks, but if the pilots are on strike, it’s not going to do much good,” he said.

Times wire services were used in compiling this report.