Continental Raises Fares on Leisure Travel

Continental Airlines raised most leisure fares Thursday, which could prompt another attempt by major U.S. air carriers to improve finances shaken by a drop in travel after the Sept. 11 hijack attacks.

Previous bids to raise leisure fares industrywide have failed, most recently in April when Northwest Airlines Corp. opted not to match an increase and forced other carriers to roll back increases to stay competitive.

However, there is no reason to expect Northwest’s response to be different in May from what it was in April, and going along with an increase would run counter to the airline’s philosophy on fares, UBS Warburg airline analyst Sam Buttrick said.

“We believe it very unlikely Northwest will go along with this increase,” Buttrick said.

Continental, the No. 5 U.S. carrier, raised published leisure fares Thursday by $20 per round-trip on most routes.

Northwest, the No. 4 U.S. carrier, has not matched the Continental increase, a spokesman said.

“If Northwest goes along with the increase, then it would likely stick, but if Northwest fails to match it [Thursday night], that doesn’t necessarily mean the initiative is dead,” J.P. Morgan Chase & Co. airline analyst Jamie Baker said.

It may take a few days to see if the increase sticks, but industrywide fare sales mean passengers often are not paying published fares anyway, analysts said. The last industrywide leisure fare increase came in November 2000.

“Raising published fares and raising paid fares are two entirely different things,” Baker said. “Raising the latter is considerably more difficult.”

Average domestic air fares were down 12% in April from already depressed year-ago levels as traffic fell nearly 11%, according to the Air Transport Assn., an industry trade group for major U.S. carriers.

The Continental fare increase comes less than a week after low-cost carrier Southwest Airlines raised fares for all classes of service by $2 to $6 round-trip on about one-third of its schedule. Southwest is the No. 7 U.S. carrier.