Continental Airline

Latino2002

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Jan 1, 2002
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Thursday May 30, 6:19 pm Eastern Time
Reuters Company News
Continental raises published leisure air fares
Recasts first paragraph, adds remarks from analyst in paragraphs 3-4)

CHICAGO, May 30 (Reuters) - Continental Airlines (NYSE:CAL - News) on Thursday raised most leisure fares, which could prompt another attempt by major U.S. air carriers to improve finances shaken by a drop in travel following the Sept. 11 hijack attacks.
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Previous bids to raise leisure fares industrywide have failed, most recently in April when Northwest Airlines Corp. (NasdaqNM:NWAC - News) 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 than 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 by $20 per round-trip on most routes Thursday afternoon. Northwest, the No. 4 U.S. carrier, has not matched the Continental increase at this time, a spokesman said.

"If Northwest goes along with the increase, then it would likely stick, but if Northwest fails to match it tonight, that doesn't necessarily mean the initiative is dead," JP Morgan airline analyst Jamie Baker said.

It may take a few days to see if the increase sticks, but industrywide fare sales mean passengers are not often paying published fares anyway, analysts said. The last successful 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 about 12 percent in April from already depressed year-ago levels, as traffic fell nearly 11 percent, according to the Air Transport Association, an industry trade group for major U.S. carriers.

The Continental fare increase comes less than a week after low-cost carrier Southwest Airlines (NYSE:LUV - News) 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.