Is Fare-Stickler Northwest Helping or Hurting the Sector?

In an industry that has lost more than $18 billion over the last two years and has two billion-dollar titans in bankruptcy, you would think that airlines would jump at the chance to raise ticket prices from 15-year lows.

Of course, you'd be wrong -- this is the airline industry, after all.

Early this week, Northwest Airlines (NWAC) thwarted a Continental Airlines(CAL)-led effort to raise ticket prices by $10 each way to compensate for the rising price of fuel. Though Northwest went along with ticket hikes on select lower-price fares, the airline balked at matching rivals hike for hike, as has been the case each time the airlines have tried to raise prices since Sept. 11, 2001.

The drama began on Friday evening, before a blizzard shut down airports across the Eastern Seaboard, when Continental announced that it would raise fares $20 on all round-trip flights on all its routes. The next day, AMR (AMR) unit American Airlines, Delta Air Lines (DAL), UAL (UAL) unit United Airlines, US Airways and three other smaller carriers all matched Continental's move.

Northwest played the spoilsport on Saturday, telling rivals it was unwilling to hike fares across the board. While some complain that Northwest is blocking a much-needed fare increase, the company says it participated in the hike, just not 100%, and that rivals made the decision to drop the issue of a fare increase.

"We only matched on the lowest fare types," explained Kurt Ebenhoch, Northwest's spokesperson. "Then on Sunday, Continental and our competitors rescinded the increase proposed across the board on every fare type, and we followed suit after. We only matched where we thought a fare increase could be sustained."

This kind of behavior is nothing new for Northwest, which blocked a handful of attempts to raise prices last year. Northwest said it could not comment on its pricing strategies, but experts say the company's strategy when it comes to pricing is to focus on raising the cheapest fares, while leaving the overpriced business-class fares alone.