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Wednesday, February 16, 2011

U.S. airlines bump up fares for premium classes

U.S. airlines bump up fares for premium classes

Major U.S. airlines raised prices again this week on their most expensive fares by up to $120 for a round trip, a sign they think a rebound in business travel is here to stay.

Delta Air Lines initiated the increase Monday on its premier class and last-minute fares favored by business travelers. Other network carriers —American AirlinesUS AirwaysUnited Airlines and Continental Airlines— subsequently matched it by raising prices on first-class, business-class and seven-day advance-purchase tickets that can cost as much as $900 for a domestic round trip.
It was the second big increase in high-end fares in as many weeks.
Ed Martelle, an American Airlines spokesman, told the Associated Press his carrier was raising fares to match Delta. Flights up to 500 miles were raised $20 each way. Fares for trips from 501 to 1,500 miles were raised $40 each way. The price of flights longer than 1,500 miles increased by $60 each way.
"People are up in arms about this business travel hike," says Rick Seaney, CEO of, who closely monitors fares. "But airlines do what they do, which is squeeze as much as they can from each seat; $120 is a little more than I expected."
By raising fares on tickets sought by business travelers, airlines are banking on more profit from those who are more likely to buy on short notice and often seek non-stop itineraries. An increase in premium-class tickets by network airlines also has a better chance of sticking as a permanent increase, because low-cost competitors derive most of their sales from inexpensive coach seats.
Last week, United and Continental increased many of their high-end fares by $20 to $60 round trip. Delta and American matched their price moves the following day.
Seaney says the newest increase was "broad-based," meaning it applies to hub flights and other routes frequented by road warriors. "It's a pretty big adjustment," he says. But, he adds, if bookings fall off in the next few days, the airlines may reconsider the increase.
Few expect the rebound in business travel to ease, however. Business travel spending will increase 5% this year, following a 2.3% increase in 2010 and a 14.1% decline in 2009, the Global Business Travel Association estimates.
The new increases follow a series of price bumps — five since December — aimed more at leisure fliers. Airlines say fares are higher because they need to keep pace with escalating fuel costs.

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