Southwest Airlines hikes domestic fares, rivals match

Oct. 09, 2019

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3 min read

Southwest Airlines hikes domestic fares, rivals match

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U.S. airfares are going up, at least if Southwest Airlines has anything to say about it.

The Dallas-based discounter raised domestic fares by $5 one-way overnight on Tuesday, J.P. Morgan analyst Jamie Baker said in a report. The move was matched by Delta Air Lines and United Airlines on routes that, including Southwest, represent nearly 60% of all seats in the U.S., according to Diio by Cirium schedules.

"We remain confident that the near-entirety of the domestic industry fare compliment, possibly with some Spirit-level exceptions, will reside $5 higher within the next 24 hours," he wrote. Not every U.S. fare increase sticks, however, but Baker noted that ones led by Southwest almost always do.

The only market Southwest has excluded from the fare increase is Hawaii, according to Baker.

Southwest is rapidly growing to Hawaii, a new market for the airline. It began flights to the islands in March and continues to expand in the market even as it pulls back elsewhere.

“Hawaii has just been tremendously successful right out of the gate,” said Southwest CFO Tammy Romo in early September.

Southwest led what J.P. Morgan estimates was the last broad domestic fare increase in the U.S., a $5 jump to one-way tickets in May.

The fare increases come as airlines deal with various volatile expenses. For example, the price of Brent crude jumped nearly 12% to $68.42 a barrel from Friday to the Monday after a weekend attack took out about half of Saudi Arabia's oil production facilities in September, according to U.S. Energy Information Administration data. Prices have since dropped back to where they were prior to the attacks.

Tickets remain a relative bargain for U.S. travelers. Airlines for America (A4A), the organization that represents airlines in Washington, estimates that airfares — including ancillary fees — are about 44% cheaper today than in 1980 when adjusted for inflation.

Whether the fare hike succeeds or not, travelers are unlikely to notice the difference due to the combination of sales and the general fluidity of economy fares. Airlines, for their part, likely want to continue to push fares higher, especially with the looming threat of a surge in new capacity when the Boeing 737 MAX returns to the skies — something that could produce significant discounting.

Featured image by AFP/Getty Images