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Tuesday, June 18, 2024 | Back issues
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Airlines Must Defend|Price-Fixing Lawsuit

     WASHINGTON (CN) — The four largest U.S. airlines lost a bid to dismiss antitrust claims brought by passengers who say they were victims of a price-fixing conspiracy that began as early as 2009.
     U.S. District Judge Colleen Kollar-Kotelly rejected the airlines' motion to dismiss the class-action lawsuit which includes 105 consolidated cased from passengers who accused the airlines of conspiring to raise fares by keeping seating capacity artificially low.
     In a decision released Oct. 28, Kollar-Kotelly said she could "reasonably infer the existence of a conspiracy" among American Airlines Group, Delta Air Lines, Southwest Airlines and United Airlines to fix prices.
     In the 41-page decision, the judge pointed to statements made by airline executives who routinely made public statements calling for the need for "capacity discipline" to firm up prices and restore profits.
     "Starting in 2009, the industry experienced limited capacity growth," the judge wrote. "Notably, as defendants' executives acknowledged, this restriction on growing capacity was a marked change within the industry. The court is satisfied that at this stage, plaintiffs sufficiently pled parallel conduct."
     In addition to the four named defendants, the passengers allege that U.S. Airways — prior to its merger with American, Air Canada, and the International Air Transport Association — also willingly conspired to unlawfully restrain trade.
     The lawsuit, filed last year, alleges that millions of customers purchased tickets for domestic travel directly from airlines or through websites such as Travelocity.com, Orbitz.com, Priceline.com, Expedia.com, and Flyfar.ca, at inflated prices.
     Last year, the U.S. Department of Justice began its own probe into a possible conspiracy among the airlines, which, according to government data, command a roughly 69-percent domestic market share.
     The plaintiffs claim that the airlines posted a record $21.7 billion combined profit in 2015 due to controlled capacity, low fuel, higher fees for checked bags and others services.
     Kollar-Kotelly's ruling notes that the passengers claim that some of the airlines' executives participate in "'Conquistadores del Cielo,' a 'secret club' of top aviation executives that meets, according to plaintiffs, twice a year on an 'off the record' basis."
     Although the plaintiffs did not point to "specifics about this conduct, they aver that '[t]hese venues provide abundant opportunities for the defendants' executives to meet face to face and conspire on capacity reduction and pricing,'" Kollar-Kotelly wrote.
     The airlines, meanwhile, argue that "'[m]ere membership in associations is not enough to establish participation in a conspiracy with other members of those associations,'" according to court records.
     Kollar-Kotelly said this was true even for Southwest, though its use of a single aircraft type and other factors gave it a "limited ability" to reduce capacity.
     Michael Hausfeld, one of the lawyers for the plaintiffs, called the decision a "substantial victory."
     "We look forward to moving forward aggressively to secure the relief the public deserves," Hausfeld said in an interview with Reuters.
     Airlines are under pressure as the U.S. Department of Transportation said that it will require airlines to refund baggage fees if luggage is "substantially delayed." In addition to the refund, the White House also wants all airlines to disclose their on-time performance record.
     Requests for comment from the airlines were not immediately returned Thursday.

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