American Airlines, which operates a hub with 460 daily flights at Philadelphia worldwide Airport, Delta Air Lines, United Airlines, and Southwest Airlines each confirmed receiving a letter from the Justice Department in connection with the agency’s antitrust probe. Briggs said. “More particularly, they have to prove an agreement to enter into conduct that restrains trade”.
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On the other hand, much of that growth is driven by smaller carriers such as Jet Blue and Alaska Air, neither of which has so far been contacted by Justice as part of its investigation. All the four of them control over 80% of the domestic seats on planes.
The average domestic airfare went up 13 percent between 2009 and 2014. And that doesn’t include the billions of dollars airlines collect from new fees: $25 each way to check a bag and $200 to change a domestic reservation.
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. It follows years of restructuring and mergers by USA airlines.
With capacity kept from increasing too fast, the airlines are fuller and the carriers are able to get higher prices for tickets.
But the rapid-fire consolidation has also attracted attention from lawmakers. Sen.
WASHINGTON (AP) As the Justice Department launches an investigation into possible collusion in the airline industry, experts say the government faces the burden of proving that carriers were deliberately signaling business decisions to each other.
“Consumers are paying sky-high fares and are trapped in an uncompetitive market with a history of collusive behavior.”
Justice officials declined to elaborate on the agency’s investigation and only confirmed that one was underway.
The government would majorly review statements, executives from these airlines have made to Wall Street analysts and others. But proving a violation requires more than showing cause and effect, antitrust lawyers said.
When airlines come together, it is possible for them exert influence (or as some may call it, discipline) on certain factors including price.
Airlines increase flights routinely based upon demand. According to the Association, airlines in the United States have been able to use its profits to invest in new fleet, pay down debts and deliver “normal return to investors through dividends and share buy-backs”.
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It’s unclear if there is a similar smoking-gun comment today. Capacity can have a big impact on airfares because, by keeping the number of seats tied closely to travel demand, airlines can exercise more power over prices. Airlines are mistaken in thinking that Wall Street cares about such metrics as return on invested capital and cash flow, Keay wrote.
