Justice Department Investigating Airlines For Possible Price Collusion
The Justice Department says it is investigating "possible unlawful coordination" by several major airline carriers. American Airlines and United Airlines have confirmed receiving a letter from the Justice Department.
In a statement, American said the department "seeks documents and information from the last two years that are related to statements and decisions about airline capacity."
A United spokesman said the company is complying fully in regard to the probe.
The story was first reported by The Associated Press, which notes that the investigation "appears to focus on whether airlines illegally signaled to each other how quickly they would add new flights, routes and extra seats." The airline industry has been steadily consolidating in recent years, with American, Delta, Southwest and United now controlling 80 percent of the U.S. market. At the same time, the AP says, the average domestic airfare rose 13 percent from 2009 to 2014 adjusted for inflation.
And while fares have been going up, so too have fees that carriers charge for things such as checked bags and reservation changes. The AP says airlines collected $3.6 billion in bag fees and $3 billion in reservation-change fees.
Sen. Richard Blumenthal, D-Conn., recently wrote to the Justice Department and urged an investigation into airline pricing. The Wall Street Journal reports that:
"Sen. Blumenthal's letter came after an international airline conference last month in Miami, where several executives of large North American airlines said they and their peers were being careful to limit service increases amid cheap fuel to protect profit margins. The letter urged the Justice Department to 'investigate this apparent anti-competitive conduct potentially reflecting a misuse of market power, and excessive consolidation in the airline industry.' "
Sen. Charles Schumer, D-N.Y., said in a statement, "It's hard to understand, with jet fuel prices dropping by 40 percent since last year, why ticket prices haven't followed. 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."
But the airline industry contends that its members are holding the line on prices.
In a statement, the industry group Airlines For America said it is "confident that the Justice Department will find what we know to be true: our members compete vigorously every day, and the traveling public has been the beneficiary, as the DOT's own data shows that domestic fares are down in 2015."
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