American, Southwest add to airline investors’ concern

DALLAS (AP) — Southwest Airlines is raising some fares just as investors are growing wary about signs of weakness in the airline industry.

Southwest raised fares by $5 each way “in a small percentage of select markets,” spokeswoman Alyssa Eliasen said late Tuesday.

J.P. Morgan analyst Jamie Baker said the increase covered about half of Southwest’s fares and seemed concentrated on tickets that require no more than a seven-day advance purchase. Those are more likely to be bought by last-minute business travelers than by vacationers.

Baker said JetBlue imposed similar increases this week, and he expected other airlines to match the higher prices. JetBlue did not immediately respond to requests for comment.

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Earlier Tuesday, Southwest and American Airlines gave disappointing forecasts for a key second-quarter revenue figure.

American, the world’s biggest airline company, said it expected revenue for each seat flown one mile to shrink 6 percent to 8 percent compared with a year ago. That’s worse than the previous forecast of a decline of 4 percent to 6 percent. Southwest said the same figure tumbled 6 percent in May and will drop 4 percent to 5 percent for the April-through-June quarter.

In the past week, United and Delta also lowered their forecasts for the revenue figure, which is watched closely. It often falls when airlines charge lower average fares. Investors fear that airlines are adding flights faster than any growth in travel demand, forcing them to cut prices.

CEO Gary Kelly said Southwest was on track for a record profit in the second quarter. But he said Southwest has started to manage capacity growth in late 2015 because of a weakening economy. He said Southwest will add more capacity in 2016, though at a slower pace than 2015.

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Hunter Keay, an analyst for Wolfe Research, said in a note to clients that airlines need to cut supply to reverse lower prices. He said Southwest was “the main culprit here, but (American) is clearly a big part of the problem, too.”

Shares of Southwest Airlines Co. fell $1.52, or 4.2 percent, to close at $34.59, while American Airlines Group Inc. gained 47 cents to $40.33. Shares of United Continental Holdings Inc. also rose, but shares of Delta Air Lines Inc., JetBlue Airways Corp., Alaska Air Group Inc. and Spirit Airlines Inc. all fell.