Airlines' airfare hikes not faring well in 2013

USATODAY

Worries over the economy and the American-US Airways merger are at play
U.S. airlines raised ticket prices seven times last year
Airlines are playing it safe right now

Good news for fliers: For the third time this year, airlines have failed to rally around each other to raise domestic airfares.

Airlines are hesitant to raise fares, analysts say, because the economy remains sluggish and there's another big airline merger afoot.

The latest unsuccessful attempt came from Delta Air Lines. On Wednesday, Delta raised domestic fares bought within seven days of travel by $4 to $10 round-trip, says Rick Seaney, CEO of FareCompare.com, which tracks airfares. By

Friday, they'd backed off.

The reason? No other airline matched it, said Delta spokesman Anthony Black.

After two years of aggressively raising ticket prices, airlines this year are finding it tougher to do so, Seaney and other fare watchers say. Last year alone, there were seven fare increases.

They're skittish, analysts say, because the economy remains sluggish and there's another big airline merger, the one between American and US Airways that was announced this week.

"Given the weak economic (fourth-quarter) numbers, it is likely that airlines are concerned that overcooking airline ticket prices right now could stunt demand," Seaney says.

The pending American-US Airways merger also is putting the U.S. industry — and the fares airlines charge — under scrutiny by the government. Senate Commerce Committee Chairman Jay Rockefeller, D-West Va., for instance, says he's concerned the latest merger could hurt consumers by driving up fares.

"I think some airlines are playing it safe," says Kevin Schorr, vice president of Campbell-Hill Aviation Group. "People will say these mergers are a bad thing and consumers will pay the price. … Everyone is going to be watching things very carefully."

Another reason for caution: Airlines are making money right now, which will fuel concerns over what a merger will do to competition and fares.

Although storms affected revenue in the last quarter of 2012, the International Air Transport Association projects a $2.4 billion net profit for North American airlines last year — up from $1.7 billion in 2011.

But Bijan Vasigh, professor of economics and finance at Embry-Riddle Aeronautical University's Daytona Beach, Fla., campus, says the merger will eventually allow airlines to raise prices.

"One of the reasons — airlines may not say it — for mergers and consolidation is to become more concentrated and to be able to raise ticket prices," he says. "When more airlines overlap, they need to compete based on service and price."

That said, he thinks consumers still have some power.

Airlines "monitor the amount of bookings," he says. "If the bookings drop, that's what discourages airlines from raising average ticket prices. If demand is strong airlines will raise prices."

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