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Phantom Fare Hikes
Opinion · April 22, 2002

Will the latest efforts to raise airfares finally fly? Two major airlines have recently tried to hike prices by $20 for a round-trip leisure ticket in an apparent effort to jump-start their earnings, but they've quickly rescinded the raises when their competitors refused to follow them.

Instead of wondering when one of these price changes will stick, as much of the mainstream media has recently done, we should pay closer attention to the mechanics of the proposed fare increases. If we did, we might discover that these maneuverings aren't as indicative of the prices we'll pay for summer travel as they are of an airline conspiracy to manipulate prices on a wider scale. Maybe it will prompt legislators to seek changes in the way air carriers do business.

Let's dispel the myth that these moves could result in higher ticket prices. Ticket prices have already taken off. There's ample evidence that carriers have effectively raised fares in many markets without bothering to tell anyone.

How's that? The airlines constantly monitor supply and demand on each route; when demand increases, as it did this spring, then the carrier decreases the number of available cheap tickets and boosts the number of more expensive tickets on a given flight. As far as the air traveler is concerned, that's a de-facto fare increase.

Anand Shah, a researcher in Middletown, N.J., doesn't need a newspaper to tell him that fares are on their way up. He's been planning a trip to Seattle this summer and, he notes, "Prices are inching up almost every week. In the last two weeks, the prices went up from $276 round-trip to $316."

If passengers are already paying more for their airline tickets, then what do all the recent stories about higher fares mean to us? Absolutely nothing. If you've been traveling by air this spring, you already know that you're paying more to travel. You know that a fare increase of $20 pales in comparison to the hundreds of extra dollars it actually costs to fly. The headlines are yesterday's news.

What is news is the way in which the airlines are trying to fix fares. The nation's airlines signed a Justice Department consent decree a decade ago designed to stop them from signaling to each other that they intended to raise or lower prices. The agreement prevented them from filing a fare increase that was effective at a future date and then voiding it if none of their competitors copied them. But isn't this the same thing? An airline will file an increase at the end of the week and then withdraw it on Monday if its competitors don't match it. By taking such action over a weekend, the airline minimizes its risk.

That's what United Airlines and Continental Airlines did when they raised prices in thousands of markets recently - they were inviting other airlines to follow along.

Couldn't the carriers just stay off the government's radar screen by adding more high-priced seats to their planes? Airfare expert Bob Harrell thinks demand is so strong that the airlines have run out of room to manage their seat inventories and need a real price increase. They have no choice but to file a fare increase with "the box" - the Airline Tariff Publishing Company (ATPCO), which is an enormous database of air fares used by global distribution systems that supply price information to travel agents and online travel sites.

The fare information is updated three times a day, and most of the changes are so minor that no one notices them. But when an airline jacks the prices up in many markets then people pay attention, including competitors.

One ATPCO insider acknowledged that there have been "high activity levels" inside the box in recent weeks. Does the volume of fare changes represent an airline business trying to deal with an inventory problem - or is it evidence of carriers fixing fares? If this were just a matter of handling seat inventory, it's unlikely that the filings would be so sweeping. A reasonable observer of the process must conclude that there's more at stake here a few $20 fare increases. The very competitiveness of the airline industry may be on the line.

As travelers, we don't need to read about price hikes to know we're paying more for our trips. We should be concerned that airlines might be using these fare changes to collude with one another, to set ticket prices. And so should our elected representatives.

Christopher Elliott is a travel commentator based in Key Largo, Fla. All e-mailed questions may be edited, condensed or republished at the site's discretion.