This afternoon in the 5:00pm EST domestic U.S. airfare distribution the FareCompare.com proprietary airfare processing system noted significant system wide airfare increase matching activity by American Airlines. United Airlines initiated the new $50 roundtrip fuel surcharge increase at 12:30pm EST Friday afternoon and was quickly matched at 8:00pm EST Friday by Delta Air Lines. In addition at 8:00pm EST Friday Continental Airlines began matching the increase on about 40% of its route system only for leisure airfares (the cheapest airfares with 14 or more days advance purchase).

This evening at 5:00pm EST American Airlines began significantly matching the $50 roundtrip fuel surcharge on approximately 55% of its route system - conspicuously absent are increases on many Southwest Airlines overlap city pairs.

This is the second increase in as many weeks in 2008, both initiated by United Airlines. This means some passengers will be paying up to $70 more for a domestic U.S. roundtrip ticket than they would have a few days after the New Year.

I have been predicting more increases for early 2008, but the size of this increase - even on smaller distance routes - is staggering. It seems the legacy airlines (United in particular) are foregoing the “nickel and dime” strategy of increases every few weeks and are going for the whole enchilada at one time. Certainly fuel is a leading driver of these increases, but a strong dose of airline restraint on supply and ample demand has fostered the environment for recent increases to “stick.”

At this point Northwest Airlines and US Airways have had no matching activity and Continental Airlines has only partially tested the waters.

In tracking the last ten successful increases since Labor Day weekend 2007, the pattern has been Northwest Airlines and US Airways matching last - I wouldn’t be surprised for this same pattern to hold with this increase.

A quick check of some competitive overlapping Southwest Airlines routes shows that the legacy airlines are “tip-toeing” around many of these city pairs to maintain equilibrium with Southwest pricing - especially on leisure airline ticket prices - showing that Southwest stubbornness to follow suit on many of the past increases is benefiting those passengers lucky enough to be traveling between cities service by Southwest Airlines.