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Delta, US Airways Suspending Recent Airfare Increases


Thursday, February 17th, 2011
News

Initiated by Delta Air Lines on Monday, and followed by US Airways on Wednesday, major domestic air carriers are suspending their recent airfare increases targeted at high volume business flights. Since the actions of these two companies, American Airlines, United Airlines, and Continental Airlines have all canceled increases intended to test the waters on the appetites of both customers and other airlines. The original proposed price increase by Delta and American airlines was a hike of $120.00 for business class travelers. Both airlines cited rising fuel prices as the cause for the increase.

However, other analysts do not see it this way. It is customary in the Airline industry to monitor one another’s airfares in order to match price movements in order to be in a competitive price range with other airlines. Many are calling this latest increase a ‘market probe’ from the airlines to test where the benchmark is for business class consumers. It is anticipated that airlines will continue to probe the market over the coming days and months. The catalyst for these recent moves by airlines has largely been based on the encouraging economic data and burgeoning corporate travel departments increasing their budgets.

This is the second so-called probe the airlines have introduced in that past two weeks in order to test the business travel fare market. Airlines have also increased general prices five times since December.

The recent pullback from price increases this past week on business travel fares may represent a larger pattern emerging with regard to the recovering US economy. Private investors and businesses alike are tentative about the pace and magnitude of the overall economic recovery. Many businesses are hesitant to re-engage with large business travel departments after watching them sink along with the rest of the economy in the 2008 downturn.

Sources:

http://www.examiner.com/finance-examiner-in-national/airfares-hikes-to-be-dropped-as-delta-and-american-airlines-capitulate

http://www.usatoday.com/money/industries/travel/2011-02-18-farehikes18_ST_N.htm

http://www.bizjournals.com/twincities/morning_roundup/2011/02/delta-hikes-airfares-others-follow.html

 



Article by Andrew Timm

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: airfares , business class , delta , us airways