DOJ Investigating Possible Airline Collusion
The Department of Justice has sent “civil investigative demands” letters to U.S. airlines as it intends to investigate whether the carriers are in collusion to limit seat availability, which in turn drive up airfares on existing seats.
That stunning bit of news came to the public forefront today, as first reported by the Associated Press. At least one airlines confirmed receiving the civil investigative letter – which are similar to subpoenas – and Justice Department spokesperson Emily Pierce confirmed to the Washington Post that investigators are looking into “possible unlawful coordination by some airlines.”
She did not elaborate or name the airlines, but United Airlines told NBC News it has received such a letter and Southwest issued a statement saying "We'll cooperate fully in answering any questions the DOJ has of us."
The investigation comes barely 10 days after Sen. Richard Blumenthal (D-Conn.) called on the DOJ to immediately investigate collusion and anti-competitive behavior by U.S. airlines. In part, Blumenthal based his letter on a report from The New York Times, in which airline executives announced parallel strategies to maintain “discipline” regarding airline capacity across flight routes — a strategy Blumenthal said was a highly valuable way for airlines to artificially raise fares and boost profit margins during the DOJ’s 2013 investigation into the US Airways/American Airlines merger.
In his letter to Assistant Attorney General William Baer, Blumenthal cited the DOJ’s investigation into the merger and the Department’s initial complaint, which said, “The structure of the airline industry is already conducive to coordinated behavior … the legacy airlines closely watch the pricing moves of their competitors. When one airline ‘leads’ a price increase, other airlines frequently respond by following with price increases of their own.”
If true, it would be a shocking blow to a U.S. airline industry that had become a darling of Wall Street in the past year, with record profits throughout virtually every domestic carrier.
NBC News noted that this civil antitrust investigation is narrowed to the question of “whether airlines illegally signaled to each other how quickly they would add new flights, routes and extra seats.”
The DOJ wants records and communications between the airlines as well as analysts and shareholders, which could have far-reaching implications.
“We fervently hope that the U.S. airlines targeted by the Justice Department’s inquiry are cleared of these allegations,” U.S. Travel Association President Roger Dow said in a statement. “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.”
WATCH: TravelPulse founder Mark Murphy appeared on CBSN to discuss the investigation.
More by Rich Thomaselli
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