AMR Corp's American Airlines, Continental Airlines Inc and Delta Air Lines Inc dropped their third attempt since mid-April to raise leisure fares after rivals refused to match the increase.
Continental, the fifth-largest US airline, kicked off the latest push Thursday by boosting round-trip fares US$20. American and Delta initially joined, while UAL Corp's United Airlines, Northwest Airlines Corp and US Airways Group Inc matched only in some cities. Airline shares fell after the fare increase failed.
Two recent attempts by carriers to boost prices fell apart after Northwest didn't go along, leaving rivals with higher fares no choice but to scrap the increases. Carriers reduced fares to spur demand after the Sept. 11 attacks deepened a decline in travel in the US recession.
"A US$20 differential per ticket is plenty of money to prompt a family of four to switch to a competing carrier," said Tom Parsons, chief executive officer of Bestfares.com, which monitors ticket prices. ``American, Delta or Continental couldn't afford to give their competitors this big of an advantage.''
American, United, Continental, Northwest, Delta and US Airways said today they dropped the increases. AMR shares fell US$0.62 to US$20.33, while Continental slid US$1.22 to US$21.05 and Delta declined US$1.32 to US$24.93. The Bloomberg US Airlines Index lost 3.9 percent to 70.4.
Leisure travel has increased since last year, while some businesses are restricting travel or telling employees to book lower fares. Leisure fares cost less than business tickets because they generally carry more restrictions and must be purchased further in advance of travel.
Northwest hasn't matched recent attempts at leisure fare increases because the carrier wants airlines to scale back on discounts instead, Merrill Lynch & Co analyst Michael Linenberg said.
"It's a differing of pricing philosophies," said Linenberg, who has a "near-term strong buy" rating on Northwest shares.
"The end result is similar for the most part. There are different ways to capture revenue."
Northwest acted as the spoiler in six attempts to raise air fares in 1999.
The St. Paul, Minnesota-based airline told employees recently it hadn't gone along with earlier leisure fare increases because those tickets aren't the ones customers are buying.
"We found that fares affected [by the previous increases] had very little to do with what our leisure customers were actually paying," Northwest said in its May newspaper for employees. "Matching might have actually led to more fare discounting, producing even lower revenue."
Kevin Mitchell, who heads the Business Travel Coalition and represents corporate travel customer concerns, has a different perspective on Northwest's strategy.
Northwest's decision not to raise leisure fares is keeping business fares high and maintaining an industry fare structure that isn't working, Mitchell said. The airline relies too much on higher fares paid by business customers subsidizing leisure travelers, he said.
"Leisure fares have got to go up for the health of the whole industry," Mitchell said.
A subsidiary of a Hong Kong-based company that has lost control of two critical ports on the Panama Canal said it is seeking US$2 billion of compensation in damages from Panama over its “illegal” takeover of the ports. Panama Ports Co, a unit of Hong Kong’s CK Hutchison Holdings (長江和記實業), on Friday said in a statement that it is demanding the sum under international arbitration proceedings that it had already started. The Panamanian government last week seized control of the Balboa and Cristobal ports on each end of the Panama Canal, after the country’s Supreme Court declared earlier that a concession allowing
DETERRENCE: With 1,000 indigenous Hsiung Feng II and III missiles and 400 Harpoon missiles, the nation would boast the highest anti-ship missile density in the world With Taiwan wrapping up mass production of Hsiung Feng II and III missiles by December and an influx of Harpoon missiles from the US, Taiwan would have the highest density of anti-ship missiles in the world, a source said yesterday. Taiwan is to wrap up mass production of the indigenous anti-ship missiles by the end of year, as the Chungshan Institute of Science and Technology has been meeting production targets ahead of schedule, a defense official with knowledge of the matter said. Combined with the 400 Harpoon anti-ship missiles Taiwan expects to receive from the US by 2028, the nation would have
POSSIBILITIES EMERGE: With Taiwan’s victory and Japan’s narrow win over Australia, Taiwan now have a chance to advance if South Korea also beat the Aussies Taiwan has high hopes that the national baseball team would advance to the World Baseball Classic (WBC) quarter-finals after clinching a crucial 5-4 victory over South Korea in a nail-biting extra-inning game at the Tokyo Dome yesterday. Boosted by three home runs — two solo shots by Yu Chang (張育成) and Cheng Tsung-che (鄭宗哲) and a two-run homer by Stuart Fairchild — the triumph gave Taiwan a much-needed second victory in the five-team Pool C, where only the top two finishers would advance to the knockout stage in Miami, Florida. Entering extra innings with the game tied at four apiece, Taiwan scored
MISSION OF PEACE: The foreign minister urged Beijing to respect Taiwan’s existence as an independent nation, and work together to ensure peace and stability in the region Minister of Foreign Affairs Lin Chia-lung (林佳龍) yesterday rejected Chinese Minister of Foreign Affairs Wang Yi’s (王毅) comments about Taiwan, criticizing China as a “troublemaker” in the international community and a disruptor of cross-strait peace. Speaking at a news conference on the sidelines of the Chinese National People’s Congress, Wang said that Taiwan has always been a territory of China and that it would be impossible for it to become its own country. The “return” of Taiwan to China was the natural outcome of the Chinese people’s resistance against Japan in World War II, and that any pursuit of independence was “doomed
RSS