In a sudden about-face that puzzled analysts,
announced on Thursday that it was raising its fares across the board by up to $40 round trip.
In a terse announcement, Northwest said it had increased unrestricted fares and some special fares by $20 to $40 round trip and its regular excursion fares by $10 to $20. Other fares, including those for seniors, military personnel and CyberSaver fares, were increased by various amounts. Northwest also raised fees for such services as excess luggage, pet transportation, lost-ticket replacement and other handling fees by $5 to $25.
The decision came just days after Northwest held out on an industrywide move to raise airfares and caused its competitors to roll back the increases.
A Northwest spokesman, Jon Austin, said he would not comment on the airline's decision to raise fares at this time.
Glenn Engel, an analyst with
, said he was "puzzled" by Northwest's decision. But he speculated that the nation's fourth-largest airline had always wanted to raise fares but did not go along with the other airlines' fare increases because it disagreed with the decision to raise fares only in certain classes.
"Northwest wanted to raise prices, but they didn't want to raise the sticker price of full-fare tickets and then offer discounts," Engel said. He noted that although airlines last year raised the list price for leisure fares by 13% and the list price for business fares by 6%, the average fares actually went down slightly, as airlines were forced to offer promotions and discounts to fill seats.
Goldman Sachs rates Northwest a market outperformer, the equivalent of a buy, and has done some underwriting for the company.
Ray Neidl, an analyst with
, said Northwest's small, across-the-board increases would be more acceptable to passengers, thus reducing the pressure to offer discounts.
"If the fares are raised incrementally in all fare classes, customers are more likely to digest the increases," said Neidl, who rates Northwest a buy. "Because the increase is on full fares and on deep discount fares, there will be a bigger benefit to yield."
ING Barings has not done any underwriting for the airline.
raised fares up to $40 round trip on full-fare tickets only. While all the other major airlines initially followed suit, Northwest played the spoiler, and the increase was rolled back.
Analysts are now waiting to see whether the other leading airlines go along with Northwest's pricing structure or if they give it the same cold shoulder that Northwest offered them.
Airlines have come under pressure to increase prices because of the sharp increase in the cost of fuel, a main cost component for the carriers. Oil prices have tripled since December 1998.
Northwest rose 7/16, or 2.4%, to close at 18 15/16 Thursday.