Airline analysts warned us airfares would climb in the new year. And there goes United, lacking a comedian’s sense of timing and sprinting away from the peloton with a $2 to $5 each way, domestic fare increase. With more than a million fares affected, a few bucks are a quick way to rack up red ink.
But apparently it only works if the peloton chases. USA Today reports no other airline has matched United’s fare increase. Not yet. Not today.
American says they’re in a holding pattern, “still evaluating” with jelly knees and looking towards Southwest. Maybe UA is simply beaten by life, never going anywhere on time, pushing fallen nuts under the seat cushions. Cleaving to the hope of a fare increase. So where is Southwest? Are their young pilots with corrugated abs and white hats and silk scarves holding prices back?
Jamie Baker, an analyst with J.P. Morgan, is quoted as saying, “Participation by Southwest is required to ensure widespread industry success” of a price hike. In other words, non-compliance by Southwest and other major players can rein in front runners like UA. Southwest carries more domestic passengers than any other airline (Delta is second, UA third) and the chances of a fare increase are wafer thin without them.
Farecompare.com reports only about half the domestic airfare increases last year stuck because other carriers did not play along. Fare increases are like love – what gives it power is the fact that it’s shared.
So let FT’s “why is this fare so expensive” thread score one for Adam Smith’s invisible hand of capitalism. And Milton Friedman’s sliding free markets where you gauge your price by observing the other person’s price.
Baker says we’ll know by the weekend if the price increases stick.