Airline Ticket Prices Rise 7.5 Percent

Airline ticket prices rose 7.5 percent in the third quarter of 2006, the biggest year-over-year increase for that period since 2000, the Department of Transportation said Wednesday.

The data was released the same day chief executives from U.S. Airways Group (LCC) and Delta Air Lines Inc. faced questions from the Senate Commerce Committee on the effect on fares and number of flights should U.S. Air's hostile bid for Delta be successful.

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The average domestic itinerary fare in the third quarter was $389.08, up 8.1 percent from the same period in 2005, but down 4.7 percent from the historic third-quarter high of $408.35 in 2000, according the Bureau of Transportation.

The largest price increase for domestic markets was again in Cincinnati, where fares rose 25 percent. The Cincinnati market has had the highest increases since the fourth quarter of 2005.

Other markets with increases greater than 17 percent in the third quarter of 2006: Charleston, S.C.; Manchester, N.H.; Providence, R.I.; and Greensboro/High Point, N.C.

The biggest year-to-year fare decrease was 16 percent for itineraries originating in Lihue (Kauai), Hawaii, where a fare war developed between Mesa Air Group's (MESA) low-cost carrier go!, launched in June, and Aloha Airlines and Hawaiian Airlines. (HA) Three other destinations in Hawaii — Kona, Kahului (Maui) and Honolulu also recorded fare drops from 7 percent to 12 percent.

In Washington, Gerald Grinstein, Delta's CEO, told legislators U.S. Air's hostile bid of more than $8 billion would reduce competition and harm consumers.

"The proposed merger would make Delta a weaker and less competitive carrier. The combined company would have a staggering debt burden of $24 billion, which would place the merged U.S. Airways-Delta one crisis away from financial collapse," he said.

U.S. Airways CEO Doug Parker in his statement to the committee said the airline has lowered fares by as much as 83 percent in more than 1,100 markets since U.S. Air's merger with America West. "This merger is in the best interest of consumers. Our synergies are not predicated on raising fares," Parker said.

Airline stocks recovered from weakness to trade mixed near Wednesday, as crude-oil prices softened.

Copyright (c) 2006 MarketWatch, Inc.

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