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.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College