US airlines in hot water

WASHINGTON The US Justice Department said earlier this week it was investigating some airlines over “possible unlawful coordination.”
There was no mention of which airlines were covered in the probe, but reports of it sent the shares of major US carriers tumbling on Wall Street by more than 2%.
News of the probe came two weeks after a Democratic senator, Richard Blumenthal, urged Justice authorities in a letter to investigate the industry for collusion and anti-competitive behaviour following a period of carrier consolidation.
inside no 10“DoJ itself played a part in this consolidation by approving several mergers and now consumers are paying sky-high fares as airlines engage in market conduct designed to keep capacity artificially low,” Blumenthal wrote.
The investigation comes after a period in which domestic flight ticket prices have steadily risen despite the plunge in fuel prices, a major cost to airlines.
Prices were up 2% last year despite crude prices falling by half, according to Department of Transportation statistics.
In addition, according to the department’s data, available seat miles on US carriers remain significantly below the peak in late 2007, before the economic crisis.
Asked about reports of the probe, a Justice Department spokesperson would only say: “We are investigating possible unlawful coordination by some airlines.”
inside no 10.1 Richard Blumenthal
Richard Blumenthal
In his letter, Blumenthal cites media reports of airline competitors openly discussing strategies and making commitments to keep “discipline” as they manage capacity.
He cited comments made openly on maintaining discipline by top executives at the June meeting of the International Air Transport Association in Miami.
He also noted that the Justice Department itself, in reviewing the US Airways-American Airlines merger in 2013, took note that airlines generally have a history of coordinating capacity and pricing moves.
“Consumers are paying sky-high fares and are trapped in an uncompetitive market with a history of collusive behaviour.”
If the department does find evidence, he said, “I urge you to use all the tools at your disposal to punish this anti-competitive and anti-consumer behaviour.”
Shares of major airlines sank on the news of the investigation. Delta Air Lines closed 2% lower, American Airlines fell 2.8%, United Continental 2.5%, JetBlue 3.4% and Southwest 1.4%.

sourced:traveldailynews.asia