It was a busy day yesterday for airlines as they continued their strategies to cut capacity and raise airfares in hopes these new elevated airline ticket prices will “stick”. The goal is to get just the right mix of capacity cuts and higher prices & fees to keep planes packed with higher paying passengers this fall and winter.
Late yesterday evening, after oil peaked over $140 a barrel during the day, both United and Delta followed Southwest Airlines’ lead earlier in the day by initiating the 20th attempted airfare increase of 2008 across the bulk of their respective route systems (closing in on the total of 23 attempts in all of 2007)
If matching had only occurred on the smaller number of Southwest city pairs hiked earlier in the day by $10 to $20 roundtrip for travel starting 2-Nov-08, we would not call the event an “official” airfare hike – our guidelines require one of the legacy airlines to hike on over 66% of its route system.
Delta and United have been the two main instigators of airfare increases this year (see the 2008 hike timeline) and they both couldn’t wait to jump in and extend the Southwest hike – initiating an increase for the first time in our tracking – within the same exact domestic U.S. airfare distribution (normally one initiates and then matching starts in subsequent airfare distributions).
United raised prices by $20 – $40 roundtrip and Delta by $20 – $30 roundtrip – and it is likely that one of the two will slightly readjust to stay competitive.
For legacy airlines — getting the right mix of capacity cuts and airfare increases within a $140 a barrel of oil environment is a grand experiment – and we are likely to see several adjustments in this experiment along the way (see my blog post on this experiment being like a game of egg-toss).
The chart above shows United’s average cheapest price for departing travel in the next 10 months on both United’s top routes and Southwest’s top routes — clearly showing United tiptoeing around Southwest on the increase and having much lower price points on the Southwest routes — also notice the large price difference for travel starting 2-Nov which coincides with the starting travel date for Southwest’s airfare hike.
Savvy travelers should start shopping now for holiday travel and lock in prices – airline ticket prices are not likely to come down much except for travel on off-peak days of the week (Tuesday, Wednesday and Saturday).