Major Airlines Under Investigations For Price Fixing

Airfare is undoubted much cheaper when you’re in the points and miles game, but paying full price for a flight is sure to make a dent on most people’s finances. The reason that prices are so high might be that airlines have been working together to keep them high. Four carriers control 85 percent of domestic routes, so ‘collusion’ is a real possibility.

Airplane

The Department of Justice said Wednesday it is investigating several U.S. airlines for possible collusion, a probe that could have a deep impact on domestic carriers’ seat availability and airfares. The Justice Department has sent subpoenas to several major airlines as part of an investigation into “possible unlawful coordination” to limit capacity increases, in an attempt to keep ticket prices high.

The DOJ has already demanded copies of all communications among the airlines, analysts and shareholders.

“It’s hard to understand, with jet fuel prices dropping by 40% since last year, why ticket prices haven’t followed,” said Sen. Charles Schumer, D-N.Y., who called for the Justice Department to launch such an investigation in December. “We know that when airlines merge, there’s less price competition. What we need now is a top-to-bottom review to ensure consumers aren’t being hurt by industry changes.”

Sen. Richard Blumenthal, D-Conn., also welcomed the investigation. What airlines call “discipline” in matching flights with travelers “is just a fancy term” for restricting the number of flights to keep profits high, he said.

A United Airlines spokesperson confirmed to CNN that the airline has received a letter from the DOJ “and we are complying with their requests.”

Delta spokeswoman Betsy Talton acknowledged that the airline has received a civil investigative demand and is fully cooperating with the Department of Justice.

American Airlines said they also had received notice from the Justice Department.

A spokesperson from Southwest Airlines confirmed receiving notice from Justice and said, “We’ll cooperate fully in answering any questions the (Justice Department) has of us.”

JetBlue said they have not been contacted for the investigation.

Airlines stocks sank following the report. Shares of American Airlines lost 2.8% to $38.80. United Continental Holdings fell 2.5% to $51.69. Southwest Airlines ended the day down 1.4% to $32.62. JetBlue Airways fell 3.4% to $20.06. And Delta Air Lines’ shares fell 2% to $40.27.

Read more at USA Today and CNN

Leave a Reply