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US airlines probed for price-fixing

July 2, 2015

The United States Justice Department has confirmed that it is investigating US airlines over allegations they kept ticket prices artificially high. But critics say the department contributed to the problem itself.

USA Flugzeug American Airlines Boeing 777
Image: Getty Images/M. Serota

"We are investigating possible unlawful coordination by some airlines," a Justice Department spokesperson said on Wednesday, in response to a report from news agency AP saying it had obtained a document from the department.

There was no mention of which airlines were covered in the probe, but AP reported several carriers had received a letter from the government asking for copies of all communications the airlines either had with each other, Wall Street analysts or major shareholders about their plans for passenger-carrying capacity, or "the undesirability of your company or any other airline increasing capacity."

Four major carriers - American Airlines, Delta Air Lines, Southwest Airlines and United Airlines - confirmed they had received the letter.

The Justice Department also asked each airline for its passenger-carrying capacity both by region, and overall, since January 2010.

The letter suggests that the antitrust investigation is focusing on whether airlines were artificially keeping capacity down by signaling to each other how quickly they would add new routes and extra seats.

Reports of the probe sent the shares of major US carriers tumbling on Wall Street by between 1 and 3 percent on a day the overall stock market was up.

'Paying sky-high fares'

The news comes after senior airline executives publicly discussed capacity last month at the International Air Transport Association's annual meeting in Miami. After hearing about that meeting, US Senator Richard Blumenthal requested a Justice Department investigation.

In his letter calling for the probe, Blumenthal also accused the DoJ of helping to create the conditions for the alleged price-fixing. "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. "I urge you to use all the tools at your disposal to punish this anti-competitive and anti-consumer behavior."

The Justice Department, which investigates mergers to assess whether they violate antitrust law, has recently approved a string of airline mergers. US Airways merged with American Airlines in 2013, United bought Continental in 2012, Southwest bought Airtran in 2011 and Delta purchased Northwest in 2008.

The mergers mean that those four airlines now control over 80 percent of the passenger market inside the US.

According to Department of Transportation statistics, domestic flight ticket prices in the US have steadily risen despite a worldwide plunge in fuel prices, a major cost to airlines. Prices were up two percent last year despite crude oil prices falling by half.

According to the department's data, available seat miles on US carriers remain significantly below the peak in late 2007, before the economic crisis.

bk/uhe (AP, Reuters, AFP)