American Airlines, Delta Air Lines, Southwest & United Airlines Under Collusion Probe

3 Comments

United States Justice Department has opened an investigation whether American, Delta, Southwest and United have colluded in expansion plans.

US Airline Collusion

The airlines have signaled to each other “capacity discipline” to keep the fares high by not introducing more capacity.

You can read more about this issue on New York Times (access here) and on Wall Street Journal (access here).

Here is an excerpt from New York Times:

But since then, airline executives have begun speaking more openly with Wall Street analysts, and at an industry conference last month in Miami, about so-called capacity discipline — industry jargon for limiting flights.

Antitrust lawyers and aviation analysts said that investigators would have to resolve a central question: whether the airline executives have talked so much publicly about discipline to appease Wall Street’s profit demands, or whether there is any smoking gun showing that airline executives have colluded privately.

Mr. Mann, the aviation analyst, said even if the airline executives felt they were mainly responding to pressure from Wall Street analysts at the conference in Miami, “if you’re listening as a Justice Department attorney, you’d say, ‘Wait a minute, these guys are all saying the same thing, and that can’t just happen naturally, can it?’ ”

And here from Wall Street Journal:

The Justice Department is investigating whether U.S. airlines colluded on expansion plans, amid concerns from consumer advocates and politicians that the industry is trying to extend its recent run of prosperity by controlling capacity to keep airfares high.

A Justice Department spokeswoman said the department is looking at “possible unlawful coordination” among some airlines. She declined to elaborate or identify the airlines being examined. The investigation began about two months ago, a person familiar with the matter said.

Conclusion

These four airlines control 80% of the domestic US traffic. Northwest, Continental, US Airways, Air Tran, America West etc. all merged to these four airlines. There are new entrants such as Jet Blue and Virgin America that are expanding.

The fewer “legacy” airlines the easier it is for them to control the pricing and the “capacity discipline”.

Isn’t it interesting while American, Delta and United are blaming the Middle Eastern Three (Emirates, Etihad & Qatar) of receiving government subsidies they may have engaged collusion in their home turf?

If you enjoyed this article, get our blog updates for free!

Previous articleSPG Hot Escapes For The Next 6 Weeks Book July 1 – 4, 2015 (20% To 35% Off + 5% Extra For SPG Members)
Next articleLe Club Accorhotels Iberia Plus Triple Avios July 1 – October 31, 2015

YOU MIGHT ALSO LIKE