Airlines Find a Way to Raise Rates

Airlines found an opportunity to raise fares this week after the government suspended a federal security fee, but investors are likely to take the news in stride.

To help aid the airline industry, Congress gave carriers a four-month reprieve from having to charge up to $10 in security fees per ticket. Major airlines opted to pocket the money they previously would have charged customers for fees, so ticket prices will largely remain the same for travelers.

Yet given the fact that airline stocks have doubled over the past two months, analysts don't expect the fare news to give stocks much of a boost.

"Considering the two-month return profile of AMR, Continental and Delta Air Lines has already exceeded that threshold, impatient investors may very well head for the exits. And who could blame them?" said J.P. Morgan analyst Jamie Baker in a research report on Tuesday.

AMR unit American Airlines was the first to opt to keep fares at current levels. After that, every major carrier, even Northwest Airlines (NWAC), which has a history of playing spoilsport, matched American.

On Tuesday afternoon, the Amex Airline index was up 0.2%, with only AMR and Delta keeping the index in the green. Continental, Northwest, UAL (UALAQ) and Southwest (LUV) were all lower.

The Justice Department said it is examining the carriers' de facto fare increase for signs that it violates antitrust law, but some analysts expressed skepticism.