Airlines rescind rate hikes
after Northwest balks

Bloomberg News

ATLANTA -- Continental Airlines Inc., Delta Air Lines Inc. and Trans World Airlines Inc. rescinded a business and leisure fare increase after Northwest Airlines Corp. declined to raise its prices.

It marked the eighth time this year that the airlines have attempted and failed to raise ticket prices for leisure passengers. Most other previous tries were stopped when Northwest Airlines, hurt this year by labor trouble including a pilots strike, decided not to follow suit. Airline analysts had been skeptical that the airlines would stick with the increase, citing concern that an economic slowdown could start to hurt travel demand. Many U.S. companies already have begun to tighten their travel budgets, according to the National Business Travel Association.

Continental, Delta, TWA, UAL Corp.'s United Airlines and US Airways Group Inc. had raised leisure fares as much as 4 percent and business fares as much as 3.5 percent, hoping to take advantage of strong travel demand in the U.S. Analysts predicted that unless Northwest, the nation's fourth-largest airline, and AMR Corp.'s American Airlines, the No. 2 U.S. carrier, also raised fares, the rest of the industry would back down.

Airlines typically try to increase fares late on Thursdays and watch competitors' reactions during the weekend before deciding whether to keep the higher price in place. Airlines can't legally agree to raise their prices at the same time.