Gov't Probes Possible Price-Fixing Among Airlines; Judge Nap Reacts
The Justice Department is investigating possible collusion among major airlines on ticket prices, the Associated Press reported this afternoon.
WASHINGTON (AP) — The U.S. government is investigating possible collusion among major airlines to limit available seats, which keeps airfares high, according to a document obtained by The Associated Press.
The civil antitrust investigation by the Justice Department appears to focus on whether airlines illegally signaled to each other how quickly they would add new flights, routes and extra seats.
A letter received Tuesday by major U.S. carriers demands copies of all communications the airlines had with each other, Wall Street analysts and major shareholders about their plans for passenger-carrying capacity.
Justice Department spokeswoman Emily Pierce confirmed Wednesday that the department was investigating potential "unlawful coordination" among some airlines. She declined to comment further, including about which airlines are being investigated.
Thanks to a series of mergers starting in 2008, American Airlines, Delta Air Lines, Southwest Airlines and United now control more than 80 percent of the seats in the domestic travel market. During that period, they have eliminated unprofitable flights, filled a higher percentage of seats on planes and made a very public effort to slow growth in order to command higher airfares.
It worked. The average domestic airfare rose 13 percent from 2009 to 2014, when adjusted for inflation, according to the Bureau of Transportation Statistics. 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. During the past 12 months, the airlines took in $3.6 billion in bag fees and another $3 billion in reservation change fees.
All of that has led to record profits for the industry. In the past two years, U.S. airlines earned a combined $19.7 billion.
Judge Andrew Napolitano reacted to the breaking news on "Shepard Smith Reporting," explaining that the feds will be looking for evidence of a "conspiracy" among the companies to limit growth in order to inflate demand.
He said any one airline can decide not to expand on their own, but cannot do it in "tandem" with another carrier.
Shepard Smith asked what sort of penalties could be handed down if these allegations prove to be true.
Napolitano said the financial penalties would be as much as "three times the harm that was caused."
"If each ticket went up a dollar - you're talking about millions and millions of tickets. Whatever that number is, whatever expenses the government incurred in prosecuting the case, just multiply it by three."
He cautioned that no complaint has been filed yet, and his analysis is based only on the early report by the AP.
Watch his full analysis above.