American Airlines has confirmed that it has raised domestic airfares this week up to $10 for a round-trip flight.
Following American’s lead, the airline’s competitors have matched the price increase. Continental, Delta, United, US Airways, Virgin America, Alaska, Frontier, and Southwest have all raised their airfares.
FareCompare.com says the across-the-board fare increase is an indicator of more price increases to come.FareCompare.com hypothesizes that the airlines are likely to raise prices again in 2011.
Usually, price competition between the airlines is intense and carriers will often abandon fare hikes if their rivals do not match price increases. According to FareCompare.com, the airlines have tried to raise fares around 10 times this year, but have failed to impose a uniform fare increase like the one unveiled this week.
Most airlines have instead turned to ancillary revenue as a way of boosting profits, including peak travel day surcharges. Learn how Airlines Profit Thanks To Ancillary Revenues Like Baggage Fees.Ancillary revenue has been so lucrative that the U.S. Transportation Department reported this week that domestic airlines made $4.3 billion in fees in the first nine months of 2010.
According to American Airlines, fuel prices played a large part in the decision to raise prices. However, spokesman Tim Smith also admitted that the higher fares were a function of supply and demand.
The increase in prices highlights the airline industries growing confidence as the industry grew steadily in 2010 after taking a swan dive in 2008 and 2009. In the first nine months of the year, the Transportation Department reported that air traffic rose by 1.5 percent.
By Adriana Padilla for PeterGreenberg.com.
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