Jamie Baker, analyst with JP Morgan issued a note this morning in which he talked about the effect of two fare increases last week (Southwest and Delta) and revenue trends.

While Delta’s $5 one-way domestic fare increase came late last week, Baker argues that the earlier increase in the week by Southwest was more meaningful in that there are higher traffic volumes associated with the lower end of the fare structure. (Where most of the Southwest fares are located.)

Jamie says we should count on “Southwest continuing to behave in a manner that helps, not hurts, industry pricing. With 60% of its fare increase occurring over holiday weekends, we’ll be watching for a sixth potential 2007 fare increase from Southwest this Thanksgiving.” 

In addition, we are coming to the close of the third quarter. Jamie reminded investors today that Continental  will issue updated cost and non-passenger revenue guidance this week, followed by AMR & US Airways guidance towards the end of the month. 

As Jamie points, out, “given the strength in August data thus far (with particularly healthy revenue trends reported by CAL, JBLU & LCC), 3Q consensus is likely to begin rising concurrent with issuance of updated guidance.  4Q consensus may rise as well given the current downward sloping fuel curve, implying (at least for now) that industry fuel expense may be slightly lower in Q4 than Q3 (which was not what airlines guided to in July, particularly in United’s case).” 

Tickers: (NYSE:LCC), (NYSE:AMR), (NYSE:CAL), (Nasdaq:JBLU); (NYSE:LUV)

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