U.S. Airlines Being Investigated for Price Collusion

airplane sunset - 370

The U.S. Department of Justice (DOJ) is investigating whether major U.S. airlines have colluded to drive up airfares by limiting routes and available seating, The Washington Post reported yesterday.

"[It's] Economics 101. Reducing supply with rising demand means increased prices," Sen. Richard Blumenthal (D-CT) told the Post in an interview. "Consumers are suffering rising fares and other added charges that seem to be the result of excessive market power concentrated in too few hands and potential misuse of that power."

Although DOJ declined to name which U.S. airlines it's investigating, Delta Air Lines, Southwest Airlines, American Airlines, and United Airlines confirmed to the Post that they are among those being investigated; representatives from each airline said they are complying with DOJ requests.

"We welcome the review," American spokesman Joshua Freed said. "The industry remains highly competitive with more people flying than ever before."

Added Jean Medina, spokesperson for airline industry group Airlines for America, "It is customers who decide pricing, voting every day with their wallets on what they value and are willing to pay for … We are 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."

Despite historically low jet fuel prices, the Post reported, the average domestic flight last year cost $391, which adjusted for inflation is a 12-year high.

"It's hard to understand, with jet fuel prices dropping by 40 percent since last year, why ticket prices haven't followed," Sen. Charles E. Schumer (D-NY) said in a statement. "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."

U.S. Travel Association President and CEO Roger Dow said he supports the DOJ investigation, but hopes that allegations prove false.

"We fervently hope that the U.S. airlines targeted by the Justice Department's inquiry are cleared of these allegations. American consumers are already jaded enough about flying that we've been wondering for awhile how many more gut-punches they could absorb before we see a dip in air travel demand -- and therefore a dip in the related econometrics for cities and businesses across the country," he 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 … We urge our partners in the airline business to cooperate fully with this investigation, and for Justice officials to bring it to the fastest possible conclusion so that the summer and fall travel seasons can go on unimpeded."

Check out the all-new MeetingNews Minute, featuring exclusive research on industry trends!