Southwest: We Have to Make This Move

Southwest Airlines (NYSE:LUV), the nation’s largest domestic carrier, raised round-trip airfares by $10 on 400 of its routes, prompting other major airlines to raise their prices as well.  Following Southwest’s announcement Wednesday, United Airlines (NYSE:LCC) increased fares for most of its U.S. flights. Delta Airlines (NYSE:DAL), Virgin America, American Airlines, and JetBlue Airways (NASDAQ:JBLU) made price increases as well.

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United Spokeswoman Megan McCarthy said Thursday that the company raised fares to “cover the increasing cost of doing business.”  In August, United Airlines passenger revenue fell for the first time since early last year.

Price increases signal that airlines could be worried about filling seats.

Four broad fare increases have taken place this year, compared to last year’s twelve.  The most recent occurred last month when Southwest increased the cost of a round-trip of less than 500 miles by $10.

In recent years, whether a fare increase lasted was dependent on Southwest’s participation because Southwest carries more passengers within the U.S. than any other airline.  J.P. Morgan analyst Jamie Baker, who tracts airfares, said this Southwest-led price increase has a “somewhat probability” of lasting, unlike Delta’s failed attempt last week.

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