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Justice Department Launches Probe of U.S. Airlines Over Alleged Price Collusion

The Justice Department is investigating alleged price collusion among the largest air carriers in the U.S.

The price of airfares can sometimes feel like robbery. When the price of jet fuel increases, it seems those increased expenses are almost immediately passed on to passengers in the form of higher ticket prices and increased fees.

In the current climate of historically low fuel costs and record airline profits industry-wide, passengers have seen very little relief in the price of flights. If anything, airfares have edged slightly higher in recent years — but charging a premium price for an in-demand product is hardly a crime.

Colluding with the competition to artificially inflate prices, however, is very much against the law. The Associated Press (AP) has confirmed that the Justice Department has opened an investigation into just such a scheme among the biggest airlines in the U.S.

American Airlines, United Airlines, Delta Air Lines and Southwest Airlines all told the AP that they received letters from the Justice Department. The airlines have said very little about the charges, other than obligatory promises to cooperate fully with investigators.

The Justice Department letters received by the airlines and obtained by the AP, focus on possible attempts to limit capacity and therefore maintain higher prices industry-wide. The documents ask the airlines to provide copies of communications with competitors, advisors and investors regarding “the undesirability of your company or any other airline increasing capacity.”

Justice Department spokesperson Emily Pierce confirmed that the investigation centers around potential “unlawful coordination” among the airlines.

The investigation comes in response to urging from the office of Sen. Richard Blumenthal, D-Conn. Though anti-trust charges of price fixing are notoriously hard to prove, the Connecticut Congressman asked for the probe following the annual International Air Transport Association (IATA) meeting in Miami where U.S. airline executives are said to have openly discussed limiting capacity in the industry as a means to inflate ticket prices.

The Justice Department refused to comment on the ongoing investigation, but industry leaders and Wall Street analysts have made no secret of a belief that keeping airline capacity in check is one of the keys to long-term profitability. Now, regulators are investigating if the airlines went too far in coordinating that vision. In the wake of the mergers in the industry, if there is a conspiracy afoot, there are certainly fewer airlines to break ranks with the plan.

[Photo: iStock]

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5 Comments
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emcampbe July 6, 2015

Nothing will come of this. Higher airfare, even if across the industry, and capacity discipline, yes, even if across the industry, doesn't mean there is collusion. In fact, in most industries, pricing rises and falls similarly between companies since they have many of the same factors affecting them. Technology components get cheaper (or more expensive), meaning smartphone and computer manufacturers all find cheaper (or more expensive) components, enabling them to change pricing. Even if not, competitive pressure does this, and general economic indicators, etc. change and affect everyone (relatively) equally. Airlines are no different. There is a lot of burden to prove collusion, but I highly doubt DL, AA, UA, etc. were talking to or emailing each other on their capacity plans. And DOJ would need some sort of smoking gun like that to prove a collusion case. But one carrier deciding to reduce capacity on some routes, with another following suit, or one airline following another to raise prices, is just business (even if consumers don't like it). If that was all that was needed for one to be guilty of collusion, pretty much every single company in every competitive industry would be guilty.

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fedup flyer July 4, 2015

Maybe you need to try harder. In less than 30 secs I found a bunch of flights for under $200 one way and under $400 rnd trip.

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k1cta00 July 4, 2015

Look at DFW to Charlotte, NC. $1,200 R/T. I can get to Europe cheaper than that.

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fedup flyer July 4, 2015

Airlines, the most regulated "de-regulated" business in the US. Just ask yourself, can you drive there for the same cost or less? Wonder who in the DOJ is looking for a pay-off.

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starflyer July 3, 2015

I see Eric Holder and the DOJ ignored common sense in order to create job security for themselves. They allowed airline mergers which they knew were harmful to consumers, so that the DOJ would then have a continued need to exist in order to actively police anti-competitive practices in the air transportation area. The DOJ basically gave the airlines the fortress hub concept on a silver platter.