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Delta, American, and United Just Raised Prices. What Will Southwest Do?


A Southwest Airlines airplane takes off at San Diego International Airport on Sept. 19

Photograph by Sam Hodgson/Bloomberg

A Southwest Airlines airplane takes off at San Diego International Airport on Sept. 19

Delta Air Lines (DAL) raised its roundtrip fares by $4 to $10 for most of its domestic flights on Tuesday, one of the periodic increases airlines launch to test their rivals’ willingness to follow suit. (Yawn.) This hike, however, came a day after American Airlines (AAL) formally became the world’s largest airline and new top player in the U.S.

American—and its new managers from US Airways—followed with the same fare hike late Tuesday, followed by United (UAL) this afternoon, according to FareCompare.com, an airfare tracking firm in Dallas, which means that for passengers on the three biggest airlines, domestic fares just went up across the board. It’s the opposite of a price war, and demand is high enough that the higher prices won’t hurt.

That’s not always the case. Delta tried this a few months ago, in late August, and failed: Its competitors declined to raise their prices, and Delta let its fares drift back to their original levels. And December is traditionally a hard time to raise prices. The last successful Christmastime airfare increase occurred in 2010, according to FareCompare.

Southwest (LUV) and JetBlue (JBLU) have not yet responded, and here it gets interesting. Southwest, in particular, has declined to join many of these reindeer games and, in many cases, has forced the bigger carriers to reverse their increases. With large-scale airline consolidation now complete, will Southwest wield the same power? “Will the new legacies tiptoe around Southwest, be forced to rollback or completely disregard?” FareCompare Chief Executive Rick Seaney wrote today in an e-mail. There’s another option, of course: Southwest may well see the opportunity to make more money and raise its fares as well. For airlines, that’s one of the powers of a consolidated U.S. market—demand that exceeds supply.

Bachman is an associate editor for Businessweek.com.

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