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US Business Travellers See Yet Another Fare Hike

by Mike Godfrey, Tax-News.com, Washington

14 September 2011


Airfares favoured by businessmen in the United States have been subject to yet another round of price increases after low-cost carrier Southwest Airlines decided to mirror earlier ticket hikes by the other major US airlines.

Airlines US Airways, Delta, United and American have all confirmed price increases on short-notice ticket purchases, and according to a report published by USA Today and compiled by JP Morgan Chase analyst Jaime Baker, Southwest's decision on September 9 to follow the industry trend is decisive in ensuring the hike will stick.

“If Southwest — the nation's largest discount airline and a price-setter on many routes — had balked, it could have forced other airlines to roll back the increase,” Baker said.

"Any airline can effectively block an increase, given the industry's reluctance to tolerate pricing discrepancies: Had Southwest not joined, we are highly confident that the increase would have unravelled," he added.

According to the report, it is the ninth fare hike for US Airways in 2011, and the tenth generally for the industry. Fares sold during Q2 of 2011 were 9% higher than in 2010, the analysis finds.

While the latest fare increases of up to USD10 per ticket are unlikely to put off many business people from travelling, Anne McDermott, Editor of FareCompare.com noted that the timing of the rises is unhelpful given the fragile state of the US economy.

"Even as Wall St. paints a grim picture of the economy, the airlines appear to be taking the opposite view by raising some airfares in the belief that travelers will pay these higher prices. Or at least, business travelers will, since that’s who the new hikes are aimed at," she wrote on FareCompare.com.

"What I find especially interesting is that the airlines feel comfortable enough to hike business fares, despite the fact that this hike sort of defies where the economy is," she added.

TAGS: aviation

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