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Delta, American, United Add $10 Holiday-Travel Fee (Update3)

By Mary Jane Credeur and Mary Schlangenstein

Sept. 25 (Bloomberg) -- Delta Air Lines Inc., AMR Corp.’s American Airlines and UAL Corp.’s United Airlines -- the three largest U.S. carriers -- added a $10 surcharge to fares on the weekends after the U.S. Thanksgiving and New Year’s holidays.

The fees apply to a “vast majority” of tickets for Nov. 29 and Jan. 2 and 3, Graeme Wallace of travel-research firm FareCompare.com said today in an e-mail. They aren’t retroactive, according to American, which moved first to impose the fees. US Airways Group Inc. also matched the surcharge.

“Passengers already pay more to fly on certain days,” Wallace said. Airlines “have now upped the ante by determining that certain peak travel days are worth an additional passenger- paid premium.”

The surcharge differs from fees imposed for services such as checking bags, because it isn’t optional, said Jay Sorensen, president of consultant IdeaWorks and a former airline marketing executive. A surcharge is easier for U.S. carriers to adopt than a fare increase when only a few dates are involved.

Airlines are under pressure to find additional revenue as the recession crimps business travel and spurs fare discounts to help attract leisure passengers. The U.S. industry has raised prices three times in 2009, after 15 increases in 2008 and 17 a year earlier, according to Dallas-based FareCompare.com.

No Bargains

“Last year, procrastinators were rewarded with lower fares during the holiday period, but I do not expect that to happen this year,” said Rick Seaney, FareCompare’s chief executive officer.

Most airline shares rose, bucking a decline in broader indexes. AMR gained 28 cents, or 3.6 percent, to $8.02 at 4 p.m. in New York Stock Exchange composite trading, while Delta added 13 cents, or 1.5 percent, to $9.05. UAL climbed 47 cents, or 5.3 percent, to $9.30 in Nasdaq Stock Market trading.

Continental Airlines Inc., the fourth-largest U.S. carrier, hadn’t matched the increase, said Julie King, a spokeswoman. Atlanta-based Delta is the world’s biggest airline, followed by American and Chicago-based United. Discounter Southwest Airlines Co. is the fifth-largest carrier, and typically doesn’t follow industry fare moves. Tempe, Arizona-based US Airways is No. 6.

Ticket surcharges have previously been applied to events such as Super Bowls. Targeting seasonal high-demand dates is “an entirely new fee-setting opportunity,” Wallace said.

‘Peaks and Valleys’

“Holiday periods are always times of peaks and valleys in demand,” said Tim Smith, the spokesman for Fort Worth, Texas- based American.

The risk in the surcharge is backlash from consumers already saddled with the fees imposed in the past year, said Sorensen, who is based in Shorewood, Wisconsin, and previously ran Midwest Airlines’ frequent-flier program.

An extra charge on some of the busiest travel days of the year “is only going to give critics of airline pricing more gunpowder to fire shots at the industry,” Sorensen said in an interview. “If you want to charge more in a holiday fare, just increase your fares. Why call attention to yourself?”

Brett Snyder, who previously worked for United and US Airways and now runs the CrankyFlier.com blog and works as an aviation consultant, said airlines recognized that they were “leaving money on the table” by not boosting prices on the days when most vacationers want to travel after U.S. holidays.

“On off-peak days it probably can’t be sustained or won’t be matched by others, so they’re just targeting the returns,” said Snyder, who is based in Long Beach, California.

Industrywide bag fees more than tripled to $669.6 million in the second quarter from a year earlier when American led most major carriers in adopting a $15 fee for the first piece of checked luggage.

Southwest, which has shunned bag fees, added a $10 early check-in option this year so passengers can board first and choose preferred seats. Dallas-based Southwest is the only major U.S. carrier that doesn’t assign seats.

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

Last Updated: September 25, 2009 16:16 EDT

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