United fails in attempt to raise fares

UPDATE: United Airlines' attempt to lead the first fare hike of the new year has failed, analysts say.

United spokeswoman Christen David confirmed Monday afternoon that the airline had rescinded the system-wide increase but kept a $10 one-way increase on flights to Alaska and Hawaii.

On Thursday, United and its partner Air Canada increased fares system-wide by $2 to $5 each way system-wide depending on the length of the flight.

Delta Air Lines matched the increase. But other airlines, most notably Southwest Airlines, did not. Typically, Southwest, which has the most number of domestic flights in the USA, has to match in order for a fare increase to stick.

"We would identify Southwest's inaction as the catalyst behind the industry's failure to raise fares," Jamie Baker, an airline analyst with JP Morgan, said in an e-mail early Monday morning.

Delta spokesman Anthony Black confirmed Monday morning that the carrier had backed off its increase.

Peter Fitzpatrick, a spokesman for Air Canada, said he could not comment on the carrier's fare increase but noted that "fares are dynamic and move up and down all the time in order that we remain competitive."

Baker said that "it often requires several attempts to reach industry consensus" on fare increases.

"Given continued industry supply discipline, particularly in the first half of 2013, we expect a continued inching up of domestic fares in coming months, accompanied by an overall reduction in promotional sale activity," Baker said.

ORIGINAL POST: Airfares will likely go up in the new year, and United Airlines became the first airline to attempt a fare increase.

The Chicago-based airline raised all of its domestic fares by $2 to $5 each way, United spokeswoman Christen David said.

Jamie Baker, an airline analyst at JPMorgan, says that the carrier raised short-haul fares for flights below 500 miles by $2, fares for flights between 500 and 1,000 miles by $3, and fares for long-haul domestic routes by $5.

Seaney says more than 1 million United fares increased. He also said that United partner Air Canada also raised fares.

As of Thursday evening, only Delta Air Lines had matched the increase.

"American is still evaluating," Matt Miller, a spokesman for American Airlines, said early Thursday.

Typically, Southwest Airlines and other low-cost carriers have to match the increase in order for it to stick.

"Participation by Southwest is required to ensure widespread industry success, in our view," Baker wrote in an e-mail. "We are cautiously optimistic."

Southwest last made a broad-based effort to raise fares on Oct. 12. On Nov. 30, the airline raised fares just in the Florida market.

Last year, airlines made 15 attempts to raise fares, according to FareCompare.com. Only seven were successful.

Baker said that "it often requires several attempts to reach industry consensus, and no individual failure should be viewed as a 'lack of pricing power.'"

"We ascribe a reasonably high likelihood of industry success to United's latest effort, though we would anticipate rollbacks over the weekend should Southwest remain silent," Baker said.