Big four USA airlines collude on prices, consumers say in suit

The department’s antitrust division is “investigating possible unlawful coordination by some airlines”, agency spokeswoman Emily Pierce said.

The lawsuits, filed in New York and Illinois, accuse Delta, American, United and Southwest airlines of engaging in a “conspiracy to fix, raise, maintain, or stabilize prices of airline tickets through a number of mechanisms”.

The Big Four of the airline sector (American Airlines Group, United Continental Holdings, Delta Air Lines, and Southwest Airlines) all confirmed that they have been contacted by the DoJ and all say they are cooperating fully with the investigation.

In an interview with NPR Monday, US airline officials charged that the three foreign carriers are subsidized by their governments and enjoy an unfair advantage against US airlines – a charge denied by the Persian Gulf carriers. Suspicions are that the Four Horsemen of Apocalyptic Fare Hikes may be running a scheme that keeps ticket prices artificially high by limiting the number of seats available to their helpless human cargo.

The discipline appears to have paid off. ABC News says that thanks to a frenzy of airline consolidations beginning in 2008, the consolidated survivors have “eliminated unprofitable flights, filled a higher percentage of seats on planes and made a very public effort to slow growth in order to command higher airfares”.

Domestic air fares rose an average of 2.5% last year, following a 1.9% increase in 2013 over the previous year, according to federal statistics. During the past 12 months, the airlines took in $3.6 billion in bag fees and $3 billion more in reservation change fees.

Those factors have contributed to lofty airline profits.

Accordingly, the fact that the same department is alluding to the abuse of market power comes as a surprise. The results of the Justice Department investigation should prove enlightening.

The U.S Travel Association’s President and CEO Roger Dow issued a strong statement after an article came out by The Washington Post that said the U.S. Justice Department was launching an investigation into whether some of the top airlines have colluded to keep prices high. We believe the capacity commentary in the public domain is/ was intended for airline equity owners.

But Seth Kaplan, managing partner for the trade publication Airline Weekly, said a more likely reason for the restraint carriers are showing in adding capacity is that airline executives have learned from past mistakes when airlines expanded too fast and lost money or eked out razor-thin profit margins.

Rick Seaney – a regular monitor of airfares – says he often hears the nation’s corporate sky daddies discussing “capacity discipline” in a domestic market where they control 80 percent-plus of available seats.