Delta Air Lines blamed persistently high fuel costs yesterday as the nation's third-biggest carrier raised the cap on its most expensive...
ATLANTA — Delta Air Lines blamed persistently high fuel costs yesterday as the nation’s third-biggest carrier raised the cap on its most expensive fares by $100, a move quickly matched by several rivals. Airline stocks rose on the news.
Atlanta-based Delta boosted the cap on one-way walk-up fares to $599, up from $499, for economy class; and to $699 for first class. The move comes six months after it announced a ticket-price overhaul designed to draw in more business travelers.
The adjustment affects full-fare walk-up and some three-day advance purchases. United Airlines and Continental Airlines matched the move, and other rivals said they were studying it.
“When Delta launched SimpliFares in January, crude oil was selling at $43 per barrel compared to as much as $61 per barrel in recent weeks,” said Paul Matsen, Delta’s chief marketing officer, referring to its program that reduced expensive fares.
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“Despite our best intentions to keep the current fare caps in place, we have been forced to find ways to offset this dramatic spike in costs.”
After the nationwide launch of SimpliFares, other major carriers lowered their most expensive fares as well.
Industry expert Terry Trippler, who runs a ticket-fare Web site called cheapseats.com., said he expects other airlines to raise their one-way fares after Delta’s changes. “You could almost bet the rent on that one,” Trippler said.
He was right, with Houston-based Continental and United doing so within hours of Delta’s announcement.
American Airlines and Northwest Airlines are each studying Delta’s fare change, spokesmen said. Northwest had twice before tried to raise fares above Delta’s cap, by $50, but couldn’t maintain the increase.
Delta spokesman John Kennedy said the SimpliFares program helped draw in more business customers, though he didn’t have any hard numbers. He said that despite the changes being made, there are still many benefits to the program.
“The cap was merely part of the package, so that people would know that they would never travel for more than this amount, and we’ve simply adjusted that,” Kennedy said.
He also noted that the sales of full walk-up fares and some three-day advance purchases account for less than 6 percent of tickets the airline sells. “We had to be realistic here,” Kennedy said.
Delta declined to say how much its one-way fare-cap increase will generate in additional revenue.
The carrier is continuing to offer the fares without a Saturday-night stay-over requirement. It also is keeping its reduction of most special service fees to $50 and 1,000 bonus miles for tickets purchased on the company’s Web site.
Delta has been trying to cut costs to avoid bankruptcy, but high fuel costs have caused its losses to continue to mount.
The fare-increase news comes a week before Delta releases its second-quarter results. Analysts expect it to record another heavy loss. It lost nearly $1.1 billion in the first quarter and $5.2 billion for all of 2004.
“I think it’s no surprise this is coming just prior to the second-quarter earnings,” Trippler said. “This is showing us Delta has stepped back, taken a deep breath and said, ‘We need to make some changes.’ “
He doesn’t expect a negative reaction from travelers, who he says have gotten used to higher transportation costs because of ballooning gas prices. “They’re going to have to pay higher prices,” Trippler said.