JP Morgan: 'Encouraged' by Southwest's Fare Hikes

Less than a week after a much-hyped sale, Southwest Airlines Co LUV raised its fares by $5 each way, according to Jamie Baker, an analyst with JP Morgan.

JP Morgan said that the price hike impacts roughly half of Southwest's 100,000 fares, concentrated in fares with fewer than seven days of advance purchase. This will touch business travelers as opposed to leisure travelers, according to the analysts.

The last price hike was in October, when Southwest followed Delta Air Lines, Inc. DAL with a $2 price increase. While Southwest has sometimes followed other fare hikes, its fare changes have frequently been followed by other carriers, prompting the analysts to speculate that this $5 increase will be matched elsewhere.

"We're confident in full industry matching," the analysts said.

JP Morgan added that the cause of the "near-universal domestic weakness as of late" was "sloppy industry pricing." With Southwest's fare increases, the analysts said they are "encouraged to see at least one airline trying to shore up revenue, even if only a portion of its fare structure."

JP Morgan has a Neutral rating on Southwest, with Overweight ratings on Delta Air Lines and American Airlines Group Inc AAL.

Year-to-date, Delta has been the best performing airline in a struggling industry. Southwest has slipped more than 17 percent, while Southwest dipped 18 percent and American Airlines dropped nearly 25 percent.

However, this underperformance follows extremely strong performance in 2014 that saw Delta gain 82 percent, American Airlines increase 115 percent and Southwest rise 125 percent.