The Justice Department is investigating whether some of America’s biggest airlines have colluded to keep airfares high, officials familiar with the matter said Wednesday.
Justice Department spokesperson Emily Pierce confirmed the probe, saying investigators are looking into “possible unlawful coordination by some airlines,” but would not confirm which carriers.
Lawmakers and consumer advocates have routinely called for investigations into whether airlines limit the number of tickets they sell to boost prices, with Sen. Richard Blumenthal (D-Conn.) recently alleging widespread “anticompetitive, anti-consumer conduct.”
A series of bankruptcies and megamergers over the past decade, has slimmed the number of major U.S. airlines from nine to four, and those carriers — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — now fly about 80 percent of all domestic passengers.
The investigation is a surprising shift for the Justice Department, which approved the unions in the first place, including, in 2013, the merger of American Airlines and US Airways to create the world’s largest air carrier.
That “air travel oligopoly,” as analyst Vinay Bhaskara wrote in a December column for Airways News, has helped the airline industry post some of its biggest profits in history. In the first quarter, American logged $1.2 billion in profit, its most profitable three months ever.
“This is a long time coming,” said Diana Moss, president of the American Antitrust Institute. In meetings of airline executives, including at the recent International Air Transport Association conference, airlines have continuously signaled “to each other that it was in their joint interest to keep capacity tight and to keep prices high.”
A United spokesperson confirmed the carrier is one of the airlines being investigated and said it is complying with investigator requests. Representatives for the other three major carriers could not be immediately reached for comment.
Jean Medina, a spokesperson for industry trade group Airlines for America, swatted back claims of collusion, arguing there are “so many options among air carriers,” including on low-cost carriers like Spirit Airlines, one of the industry’s fastest-growing companies.
“It is customers who decide pricing, voting every day with their wallets on what they value and are willing to pay for,” Medina said, adding that about 222 million passengers are projected to fly this summer, a post-recession high.
“We are confident that the Justice Department will find what we know to be true,” Medina said. “Our members compete vigorously every day, and the traveling public has been the beneficiary.”
U.S. airlines received a letter Tuesday demanding copies of all communications the carriers shared with each other, their shareholders and Wall Street analysts about their plans for limiting seat capacity, according to the Associated Press, which first reported the investigation.
Historically low prices for jet fuel, airlines’ biggest expense, have helped the carriers save billions of dollars in expenses: American, Delta, Southwest and United saved about $3.3 billion on fuel in the first quarter, financial filings show.
Yet those savings have not found their way back to passengers. The average domestic flight last year cost $391, the highest price since federal statisticians started tracking fares two decades ago. Adjusted for inflation, fares are at a 12-year high.
In a letter last month to William J. Baer, the head of the Justice Department’s antitrust division, Blumenthal, the Connecticut senator, said, “Consumers are paying sky-high fares and are trapped in an uncompetitive market with a history of collusive behavior.”
Shortly after the news broke, investors began to sell off airline stocks, including United Continental (down 2.4 percent), American Airlines (down 2.6 percent), Southwest (down 2.3 percent) and Delta (down 2.7 percent).
“We fervently hope that the U.S. airlines targeted by the Justice Department’s inquiry are cleared of these allegations,” U.S. Travel Association President Roger Dow said. “American consumers are already jaded enough about flying that we’ve been wondering for awhile how many more gut-punches they could absorb before we see a dip in air travel demand.”
http://www.washingtonpost.com/busin...01c-11e5-aeb9-a411a84c9d55_story.html?hpid=z1
Justice Department spokesperson Emily Pierce confirmed the probe, saying investigators are looking into “possible unlawful coordination by some airlines,” but would not confirm which carriers.
Lawmakers and consumer advocates have routinely called for investigations into whether airlines limit the number of tickets they sell to boost prices, with Sen. Richard Blumenthal (D-Conn.) recently alleging widespread “anticompetitive, anti-consumer conduct.”
A series of bankruptcies and megamergers over the past decade, has slimmed the number of major U.S. airlines from nine to four, and those carriers — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — now fly about 80 percent of all domestic passengers.
The investigation is a surprising shift for the Justice Department, which approved the unions in the first place, including, in 2013, the merger of American Airlines and US Airways to create the world’s largest air carrier.
That “air travel oligopoly,” as analyst Vinay Bhaskara wrote in a December column for Airways News, has helped the airline industry post some of its biggest profits in history. In the first quarter, American logged $1.2 billion in profit, its most profitable three months ever.
“This is a long time coming,” said Diana Moss, president of the American Antitrust Institute. In meetings of airline executives, including at the recent International Air Transport Association conference, airlines have continuously signaled “to each other that it was in their joint interest to keep capacity tight and to keep prices high.”
A United spokesperson confirmed the carrier is one of the airlines being investigated and said it is complying with investigator requests. Representatives for the other three major carriers could not be immediately reached for comment.
Jean Medina, a spokesperson for industry trade group Airlines for America, swatted back claims of collusion, arguing there are “so many options among air carriers,” including on low-cost carriers like Spirit Airlines, one of the industry’s fastest-growing companies.
“It is customers who decide pricing, voting every day with their wallets on what they value and are willing to pay for,” Medina said, adding that about 222 million passengers are projected to fly this summer, a post-recession high.
“We are confident that the Justice Department will find what we know to be true,” Medina said. “Our members compete vigorously every day, and the traveling public has been the beneficiary.”
U.S. airlines received a letter Tuesday demanding copies of all communications the carriers shared with each other, their shareholders and Wall Street analysts about their plans for limiting seat capacity, according to the Associated Press, which first reported the investigation.
Historically low prices for jet fuel, airlines’ biggest expense, have helped the carriers save billions of dollars in expenses: American, Delta, Southwest and United saved about $3.3 billion on fuel in the first quarter, financial filings show.
Yet those savings have not found their way back to passengers. The average domestic flight last year cost $391, the highest price since federal statisticians started tracking fares two decades ago. Adjusted for inflation, fares are at a 12-year high.
In a letter last month to William J. Baer, the head of the Justice Department’s antitrust division, Blumenthal, the Connecticut senator, said, “Consumers are paying sky-high fares and are trapped in an uncompetitive market with a history of collusive behavior.”
Shortly after the news broke, investors began to sell off airline stocks, including United Continental (down 2.4 percent), American Airlines (down 2.6 percent), Southwest (down 2.3 percent) and Delta (down 2.7 percent).
“We fervently hope that the U.S. airlines targeted by the Justice Department’s inquiry are cleared of these allegations,” U.S. Travel Association President Roger Dow said. “American consumers are already jaded enough about flying that we’ve been wondering for awhile how many more gut-punches they could absorb before we see a dip in air travel demand.”
http://www.washingtonpost.com/busin...01c-11e5-aeb9-a411a84c9d55_story.html?hpid=z1
