Most airlines quietly raise fares $5, $10 Filled planes fuel strong performance, bid for more revenue

February 01, 1996|By FORT WORTH STAR-TELEGRAM

FORT WORTH, Texas -- Fresh off their best year in nearly a decade, most of the nation's airlines have quietly added $5 to their one-way fares and $10 to their basic round-trip leisure fares.

The fare increases apparently were initiated by Delta Air Lines this week. Most other major carriers, including Fort Worth-based American Airlines, quickly matched them.

For example, the coach fare for a flight between Dallas/Fort Worth Airport and Indianapolis rose from $413 one way to $418. The price of a Dallas/Fort Worth-Boston coach ticket rose from $626 to $631.

The $5 one-way and $10 round-trip increases also apply to most, but not all, of the airlines' various levels of discounted fares.

The price increases, not surprisingly, were implemented without the fanfare that normally goes along with fare price reductions.

"The basic fundamental that's driving earnings and everything else in the airline industry is that capacity isn't growing," said John Pincavage, analyst at Dillon Read & Co. in New York.

"The number of seats isn't growing, but the number of people wanting to fly is. Wherever they have an opportunity to gain extra revenue, they're doing it.

"You've got an attitude out there in the industry now that says, 'Hey, we're coming off a good year. Things are pretty tight. We're not ordering airplanes. So let's keep raising prices until we meet resistance.' "

Most carriers have been reporting record or near-record "load factors" -- the percentage of seats filled by paying passengers -- in recent months.

The industry's relatively strong 1995 profit performance, more than $4 billion, excluding extraordinary charges, also illustrates how decisions by most carriers in the past three years to rein in capacity growth have allowed consumer demand to catch up with industry capacity.

That change in the supply-vs.-demand equation has allowed the industry to raise the price of coach fares -- the base fare from which all discounts are figured -- gradually over the past year.

Julius Maldutis, an airline analyst at Salomon Brothers in New York, said even the normal seasonal weakness in demand during the winter, which led to a big spate of fare discounting in late December and early January, cannot stop the higher fare trend.

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