What a difference seven months and US$61-a-barrel oil makes.
Delta Air Lines, which captured headlines in January when it placed limits on its coach and first-class fares in a bid to compete with low-fare airlines, said on Thursday that it had increased the price caps by US$100 per one-way fare.
Delta said it was forced to take the step because of high oil prices, which have driven up the cost of jet fuel.
Competition was also a factor. In the last few months, big airlines have raised their fares above the limits put in place by Delta, which had set a high of US$499 one-way for coach tickets and US$599 for first-class fares within the US.
Now, Delta's highest-priced coach fare is US$599 one-way -- or US$1,198 round-trip -- and its highest first-class domestic fare is US$699, or US$1,398 round-trip. The prices are for tickets purchased at the last minute and, in some cases, within three days of a flight.
Delta "has finally caved in to reality," said Raymond Neidl, an airline industry analyst with Calyon Securities, in a research report.
Delta had rolled out its plan, called SimpliFares, in response to low-fare airlines including Southwest, JetBlue and AirTran, which carried one-third of passengers within the US last year.
But even Delta's original limits were higher than the US$299 one-way fare caps that those airlines, and others, place on coach ticket prices.
Gary Kelly, chief executive of Southwest, said on a conference call that the Delta move on Thursday highlighted the difference between major airlines and their low-fare rivals.
"It is no surprise to us that they are relinquishing their cap," said Kelly, whose airline reported a 41 percent increase in second-quarter net income Thursday, beating Wall Street forecasts.
"This is very helpful to Southwest," he added.
A Delta spokeswoman, Chris Kelly, emphasized on Thursday that the airline was charging the highest prices on less than 6 percent of its domestic fares. But that includes a number of routes, including flights from New York to Dallas, Burbank, California, and Albuquerque, according to Terry Trippler, an industry analyst who tracks airfares.
"With oil at US$60 a barrel and over, something had to give, and today it did," Trippler said.
Delta, which is the nation's third-biggest airline behind American and United, has been mired in financial problems for several years. It barely escaped a bankruptcy filing last year, and is in the midst of a restructuring plan aimed at saving US$5 billion through next year.
Many analysts questioned Delta's original plan to cap fares, saying that the airline had not yet reduced spending enough to be able to afford the change. Because of its financial crisis, Delta has been unable to afford to buy contracts locking in the price of jet fuel. Only 10 percent of its fuel purchases were protected by hedging contracts in June, Kelly said, the first time since early last year that Delta had bought such protection.
By contrast, Southwest has contracts locking in the price of 85 percent of its jet fuel purchases, Kelly said on Thursday, and has purchased hedging contracts protecting 65 percent next year.
Southwest surprised analysts by reporting net income of US$159 million, or US$0.20 a share, compared with US$113 million, or US$0.14 a share, in the second quarter last year. The analysts' consensus had been US$0.18 per share.
Like its rivals, Southwest is charging slightly more for air fares, raising prices by US$2 to US$3 one-way in May, and it has added more service, starting flights from Pittsburgh in May. And Southwest has renewed its dogged emphasis on cost-cutting.
Despite higher oil prices, Kelly said that Southwest, which has posted 57 consecutive profitable quarters, hoped to increase its net income by 15 percent next year.
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