Last updated: 09:37 AM ET, Fri June 10 2016

Is This The End of Low Air Fares?

Airlines & Airports | Josh Lew | June 10, 2016

Is This The End of Low Air Fares?

Photo courtesy of Thinkstock

Earlier this week, JetBlue raised its domestic fares by $3 on all seats except those in its premium class. As with all such fare hikes, the big question was whether or not other airlines would follow suit. A day after ‘Blue upped its prices, all other major carriers in the US decided to follow the low cost carrier’s lead. American, United, Southwest and Alaska Airlines all raised their fares by $3 on routes that overlapped with JetBlue.

Not the first fare hike this year... and not the last

This is not the first industry-wide increase of the year. However, it is significant because it shows that carriers are trying to reverse a trend of falling fares that has led to a significant drop in seat revenue figures.

The lower revenue numbers have disappointed investors in recent months. This has, in turn, led to a drop in the value of most airlines’ share prices.

Making investors happy

After it was clear that the latest fare increase had taken hold, investors responded positively. Airline stocks rose more as a result of this hike than as a result of any of the previous successful price increases this year. Delta, American, Southwest and United shares were all up by more than two percent. JetBlue stock was up by 3.3 percent per share.   

READ MORE: Delta Raises Fares While Southwest Lowers Them

A single fare increase like the latest one initiated by JetBlue cannot solve the problem of low revenue numbers by itself. What it seems to have done, however, is to give investors some confidence that airlines are slowly trying to turn the trend around.

A new trend? Flash sales

Southwest followed JetBlue’s lead when it came to the price hike, but it has also adopted another strategy that JetBlue is very fond of: the flash sale. As it announced its own fare hike earlier this week, Southwest also launched a three-day flash sale with fares as low as $49.

This could be a new trend for airlines. Carriers could somewhat soften the effect of rising airfares with temporary price cuts in the form of flash sales or short term promotions. This seems to have already worked for JetBlue and for Southwest.

Analysts predict that the per-seat revenue numbers will bottom out sometime this summer and that, with continued incremental fare increases, revenue will increase by 2017. This will make investors happy, but it may bring disappointment to fliers who are just getting accustomed to low fares. The good news is that flash sales seem to be becoming more common, so there could be more chances for significant savings... occasionally. 


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