- Half of attempted price increases have stuck, JPMorgan says
- Airline stock index rises most since October after report
U.S. airlines’ efforts to increase fares are meeting with more success this year than during the previous three, JPMorgan Chase & Co. said Tuesday. Airline shares rose the most in eight months.
JetBlue Airways Corp. raised domestic fares $3 one way Monday excluding its premium product, JPMorgan analyst Jamie Baker said in a note to clients Tuesday. American, Delta, United, Southwest, Alaska and Virgin America airlines matched the change on routes where their services overlap with JetBlue’s, Baker said. Carriers typically roll back attempted price increases within a day or two if other airlines don’t follow suit.
Airlines are trying to reverse more than a year of annual declines in revenue from each seat flown a mile, a critical yardstick known in the industry as RASM. This week’s move is the sixth lasting airfare increase in 12 tries this year, for a 50 percent success rate, according to the report. Carriers were only able to maintain higher prices in 18 percent of their attempts in the 2013-2015 period, Baker said.
“We remain of the view that we are on the cusp of a definitive domestic RASM inflection point, most likely in the mid-to-late summer time period,” Baker said in a note to investors. “While no single fare increase is likely to materially elevate RASM from its doldrums, self-help efforts should, in our view, assuage investor fears that pricing departments are somehow asleep at the switch.”
The Bloomberg U.S. Airlines Index climbed 3.5 percent at 1:10 p.m. in New York after gaining 4 percent for the biggest intraday increase since Oct. 9.
Domestic fares on a per-mile basis fell every month from April 2015 through April 2016, the latest month for which data is available, according to Airlines for America, the lobbying group for major U.S. carriers.