Pressured by high fuel costs, Delta Air Lines Inc. yesterday raised its cap on some of its ticket prices by $100, prompting several other airlines to boost their fares.
U.S. carriers have raised fares seven times this year, the highest number of annual increases in nearly a decade. Average fares for summer and fall are up 10 to 15 percent from last year, according to airfare expert Terry Trippler of Cheapseats.com.
With fuel prices continuing to rise, more fare increases are probably coming, Trippler said. Next summer, ticket prices could be another 20 percent higher, he predicted.
"If you see a cheap fare for the holidays now, you better grab it," Trippler said.
Following Delta's announcement, United, US Airways and Continental immediately matched the increase. Spokesmen for American Airlines -- the world's largest carrier -- and Northwest Airlines said they were "studying" the increase.
Even low-cost carriers such as Southwest Airlines have raised ticket prices this year. Southwest yesterday said its second-quarter earnings rose 41 percent from the year before because of stronger ticket sales and its hedging of fuel prices.
Delta's highest fares -- those for last-minute, walk-up tickets -- rose to $599 each way in coach and $699 each way in first class. In January, Delta surprised the industry by capping its most expensive fares at $499 and $599 each way. The airline also eliminated its requirement of a Saturday-night stay.
Yesterday's fare increases, which primarily affect business travelers who purchase last-minute tickets, do not reverse the easing of the Saturday-night rule.
Paul Matsen, Delta's senior vice president and chief marketing officer, said the earlier fare restructuring was launched when crude oil was selling at $43 a barrel, compared with $61 a barrel recently.
"Despite our best intentions to keep the current fare caps in place, we have been forced to find ways to offset this dramatic spike in costs," Matsen said.
Delta, the nation's third-largest carrier, is expected to lose about $350 million in its second quarter largely because of fuel prices and increased competition from low-cost carriers, according to Thomson First Call. The airline, which has been on the brink of filing for Chapter 11 bankruptcy protection for nearly a year, lost $1.1 billion in the first quarter -- more than any other carrier.
Delta's fare increase is a "positive" for Delta and for the airline industry, said Ray Neidl, an analyst for Calyon Securities Inc. It "does not come as a surprise to us, as it was something that was necessary in the face of increasing oil prices."
Delta stock rose 61 cents a share to close at $4.05 yesterday.
When Delta capped its fares earlier this year, other airlines reluctantly lowered ticket prices in markets where they competed with the Atlanta-based carrier.
Since then, several airlines have raised fares to force Delta to back away from the cap, but until yesterday, Delta had refused.
Some fare increases have failed to stick. Last month, Northwest tried raising its prices as much as $50 each way but had to back down when other airlines did not match the increase.
Delta's action underscores the difficulty of offering lower fares without a lower cost structure. Gary Kelly, Southwest's chief executive, said he was not surprised that Delta raised its cap, noting that Southwest also has a cap -- $299 each way. But, he added, its lower fares are supported by lower costs.
"Because we have a low cost structure, it works. And it works very well," he said.
Delta's cap cost the industry about $150 million and was one of the biggest revenue hits the airlines had experienced in years, said Darryl Jenkins, visiting airline economics professor at Embry-Riddle Aeronautical University in Daytona Beach, Fla. The fare increase, he said, could help stabilize some of the most financially troubled carriers, particularly during the third quarter and traditionally weaker fourth quarter.
"This is good news to the industry, which it hasn't had in a long time," Jenkins said.