11/17 17:58 United Leads as Airlines Raise Some Fares Up to $200 (Update4) By Lynne Marek

Chicago, Nov. 17 (Bloomberg) -- United Airlines led American Airlines and other rivals in raising some U.S. fares as much as $200 round-trip, one of the largest business-fare increases in at least seven years, amid higher wages and other costs.

UAL Corp.'s United, the largest airline, said prices of one- way tickets bought fewer than three days before travel will rise by $50 to $100. AMR Corp.'s American, the second-biggest carrier, and No. 5 Continental Airlines Inc. matched United. No. 3 Delta Air Lines Inc. said it raised some business fares about $82 round- trip in a third of its U.S. markets.

United wants to boost revenue as it faces the expense of its planned $11.6 billion purchase of US Airways Group Inc. and higher wages in a new four-year pilots contract. With the higher costs and lost revenue from canceled and delayed flights this year, Chicago-based UAL reported a third-quarter loss and is expected to have a fourth-quarter loss.

``When you have an economy that's strong, it causes both labor costs to go up and it makes your ability to pass along the higher costs better,'' said Goldman Sachs analyst Glenn Engel, who rates UAL a ``market outperformer.''

UAL shares rose $1.38 to $37.88, while Continental rose $1.25 to $48.88. AMR fell 25 cents to $34.06, and Delta declined 31 cents to $48.19.

America West Airlines, a unit of America West Holdings Corp., said it also matched the United increase in some markets, primarily in the western U.S. Trans World Airlines Inc. said it's studying the increases. Northwest Airlines Corp. and US Airways haven't yet responded.

U.S. airlines this year have been successful in raising fares, mainly because of higher fuel prices, and haven't had to increase discounts on fares, Engel said. Jet-fuel prices for delivery at New York harbor have risen about 44 percent this year to $1.13 a gallon from about 77 cents at the end of last year.

Still, United leading the latest increase is ``bizarre,'' given its recent labor problems and unhappy customers, Engel said.

Fare Details

The United-led increase adds $50 to one-way U.S. flights less than 1,500 miles, not including transcontinental flights or trips to Hawaii, and $100 for similar one-way U.S. flights of more than 1,500 miles. The previous, lower fares for these flights will now apply to fares purchased three to six days in advance of travel.

Delta's increase added about 10 percent on tickets purchased 10 days in advance of travel in about 5,900 of its 15,000 markets, the company said.

American Express Corporate Services, which runs the biggest travel agency, said in a report last month that the typical round- trip business fare was $1,078 in July, up 11 percent from the previous year. With most larger companies and increasing numbers of smaller companies getting corporate discounts, the average business fare paid was about $624 round-trip.

United spokesman Joe Hopkins declined to comment on reasons for the fare increase. Continental spokesman David Messing also declined to comment.

``My initial impression is there is no way (the increase is) going to hold, not with demand moderating as it is,'' said Credit Suisse analyst Jim Higgins.

The airlines can't coordinate a fare increase, but they typically won't maintain such a boost if some of their competitors don't follow suit.

Wooing Customers

United has been trying to win back customers after more about 27,000 flight cancellations between April and September that the company said stemmed from labor talks, weather and air-traffic congestion.

The airline last month reached a four-year contract with its pilots union that called for immediate pay raises of as much as 28.5 percent as well as annual increases of at least 4 percent.

The fare increase comes as United today got a federal court in Chicago to order its 15,000 mechanics and their union to halt what the airline called ``illegal job actions.''

United won a temporary restraining order against International Association of Machinists District 141M and the about 15,000 mechanics. Contract talks between the sides stalled last week, and United contends that the workers have been conducting a job slowdown that is causing flight cancellations.

The two sides are tentatively scheduled to make separate presentations to the National Mediation Board on Monday.

Meanwhile, United's 26,000 flight attendants also are asking the airline for pay increases now, even though no wage adjustments are due until next year. The attendants, represented by the Association of Flight Attendants, plan to leaflet and picket at airports worldwide on Monday.

The fare increase led by United could be the largest ever, said PaineWebber analyst Sam Buttrick in a report.

The increase is inconsistent with a recent moderation in travel demand and the carrier's ``reliability problems,'' Buttrick said. It's also inconsistent with United's attempts to win back customers and gain political support for the US Airways purchase, he said.

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-- Carl Jenkins (somewherepress@aol.com), November 18, 2000