Consumer Fraud

Major U.S. airlines under investigation for price fixing

whistleblower 5 370x210 Major U.S. airlines under investigation for price fixingFederal investigators have subpoenaed several major U.S. airlines as part of a newly launched probe into a possible price-fixing scheme that kept airfare prices high by limiting the number of available seats on flights.

The U.S. Department of Justice (DOJ) mailed several investigative demand letters to the airlines June 30, acting on clues investigators haven’t fully disclosed. Among the evidence under review are public comments made by airline executives and industry analysts.

American Airlines, United Continental Holdings, Delta Airlines, and Southwest Airlines are among the companies under investigation.

U.S. regulators have allowed two major airline mergers to occur in recent years, including American Airlines and U.S. Airways and United and Continental. Some analysts believe these mergers made a big step in restricting competition, which in turn boosted profits and made it financially harder on consumers.

Consumer groups and lawmakers have expressed concern in recent months that the airline companies are trying to maintain their soaring profits by colluding to keep capacity near a certain level, driving up demand and ticket prices.

According to the Chicago Tribune, after the mergers were completed, the airlines 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.

The changes had their intended effect, the Chicago Tribune reports. “The average domestic airfare rose 13 percent from 2009 to 2014 … And that doesn’t include the billions of dollars airlines collect from new fees: $25 each way to check a bag or $200 to change a domestic reservation. During the past 12 months, the airlines took in $3.6 billion in bag fees and another $3 billion in reservation change fees.”

“American consumers are already jaded enough about flying that we’ve been wondering for a while how many more gut punches they could absorb before we see a dip in air travel demand,” U.S. Travel Association CEO Roger Dow said in a statement. “If not for the radical consolidation we have seen in the airline industry in the last few years, we probably would not even be having this conversation. Now that four carriers control 85 percent of domestic routes, ‘collusion’ is a thought that’s constantly going to be in the back of the minds of federal regulators.”

Sources:

Chicago Tribune
CBS News