Southwest Airlines: Look Out For Business Fares Hike

I cannot resist pointing out yet another false "BAD NEWS" story.

The headlines about a major increase in fairs by Southwest Airlines (LUV) have been along the lines of "SOUTHWEST TO GO COMPETE FOR BUSINESS TRAVELERS". The headlines and the articles imply that the move by LUV to dramatically raise prices to business travelers is bad news for companies such as Continental (CAL). The fact is, that after the change, business travelers will average higher ticket prices on both airlines.

Southwest recently offered about 8 prices for the same seats on its typical flight. Under the new scheme, the same seats will be offered at 15 different prices. Frequent fliers who pay extra will be given the best seat locations available and "a free cocktail". Wow! How nice of them to give away free drinks.

The price increase is starting out at $10 to $30 per seat. After the new plan has been in operation for a while, do you think it might be easy to increase some of the fares more? Do you think that higher fares at LUV will give the legacy carriers a reason to lower fares or to raise them?

The market is fearful that congress will not settle major issues by the November 16 deadline. The funding for the new air traffic control system has already been deferred to next year. The nation needs the new system and it should be paid for by the users. The congress will fight this battle next year, but in the mean time the airlines will keep on flying full planes and they will keep on raising fares as necessary to offset fuel price increases.

The very old fleet of US planes cannot haul more people, when demand exceeds supply the price goes up. The news media did LUV the favor of avoiding saying that business fares are jumping but the fact is that they are. BUY, BUY, BUY. Add money if you can and buy more stock!