|Air Fares Have Difficulty Taking Off|
|Key Words||Airfares, Strike, Yield, Revenue, Prices, Net Income, Demand, Capacity, Loss.|
Industry analysts are warning that U.S. airlines will have difficulty raising airfares in 1999. This follows a year when the airlines attempted to increase fares 16 times but had to retreat due to customer resistance. Northwest, in particular, which had a 15-day pilots' strike, was unwilling to match the increases. As a result, Delta's yield -- the average passenger revenue per mile -- fell from 12.97 cents to 12.63 cents in the last quarter of 1998 compared to a year earlier. Northwest experienced a reduction from 12.03 cents to 10.92 cents. Only cost-cutting and lower fuel prices allowed Delta's net income to increase.
Although the airlines have been carrying record numbers of passengers for five years, domestic demand is said to be soft. It is expected that industry capacity will increase 5.4 percent in 1999. Airlines that are expanding particularly fast are Southwest, Continental, US Airways, and Northwest. Also, Northwest, which suffered a net loss in the last quarter of 1998, is unlikely to increase fares in order to regain customers and net income.
(Updated March 1, 1999)
|Source||David Field, "Airline growth plans will keep fares down", USA Today, January 20, 1999.|
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