UPDATE #2 (1-18-11 2:25pm CST): At lunch time today Southwest jumped in matching the cheaper of the two initiated hikes (see initial rundown below) across the bulk of their route system.
The Southwest matching was was about 75% of the level of the hike in the first week of the year underscoring that competitive pressure still prevents complete system wide increase attempts.
Additionally Alaska Airlines also matched along with US Airways adding more matching routes – virtually assuring the success of this hike making it the 4th in a little over a month.
Because this hike was initiated by two airlines simultaneously with different amounts, airlines have matched portions of both hikes in order to maintain a competitive equilibrium.
I don’t recall seeing Southwest, even in the height of runaway oil prices in 2008 match or initiate domestic airfare hikes in two successive weeks — or for that matter successive months.
UPDATE #1 (1-17-11 10:42pm CST):
Continental and US Airways matched the United Airlines version of the hike ($4 to $10 roundtrip), while American matched both United and Delta ($10 to $20 roundtrip). Southwest matched Delta in a relatively small number of markets.
Tonight’s domestic airfare feed is not all bad news for price conscious consumers as Frontier launched a big sale along with typical Monday evening sale activity from Southwest – it isn’t unusual to see sales with limited number of seats amidst domestic airfare increases.
EARLIER: At 1pm EST today the FareCompare proprietary airfare processing system detected significant domestic airfare hike activity simultaneously from both Delta and United Airlines on over 40,000 city pairs representing the bulk of their respective route systems.
Delta raised domestic ticket prices by up to $20 roundtrip ($10 each-way) and United by up to $10 roundtrip ($5 each-way).
The Delta hike is laddered – based on distance with $5 hikes each-way for trips less than 1,500 miles and $10 for longer trips.
The United hike is also mileage based into 3 groupings: $2 each-way for trips less than 500 miles, $3 each-way between 500 – 1,500 miles and $5 each-way for trips more than 1,500 miles.
Usually one airline leads out on a domestic hike with others deciding to match in the following 36 hours; in this case either United or Delta will have to modify their hike to bring them in line with one another ($10 or $20 roundtrip) as airlines still live by the recessionary competitive rule of never being $1 more or less than their competiton.
The next domestic airfare distribution is at 8pm EST and we are likely to see significant matching activity by legacy airlines; oddly, Continental did not file a hike along with its newly merged partner at 1pm.
While we have seen this pace of weekly domestic hike activity in 2007 and 2008, we have never seen Southwest match legacy-initiated hikes in back-to-back weeks.
OPEC revised its 2011 demand forecast earlier today which, along with the economy, has airline management’s full attention.
This domestic airfare hike attempt represents the 2nd in 2011 and the 4th since mid December of last year.
We will continue to update as significant events occur.