Major Airlines Accused of Price-Fixing Conspiracy

     
     (CN) – Delta, Southwest, United, and American Airlines conspire to keep flight capacity the same while gas prices drop and airfares and profits skyrocket, consumers claim in federal court.
     Three customers, Ethan Brodsky, Jeffrey Robb, and Valbona Alla, filed an antitrust class action against Delta Airlines Inc., American Airlines Inc., Southwest Airlines Co., and United Airlines Inc. in the Milwaukee Federal Court on Monday.
     The suit alleges “collusion among major airlines to limit routes, information and available seats to keep airfares artificially high. Plaintiffs allege that defendants illegally signaled to each other how quickly they would add new flights, routes, and extra seats.”
     The plaintiffs claim that although the U.S. economy grew about 2.2 percent per year from January 2010 to January 2014, domestic flight capacity remained virtually the same at that time, while average domestic airfares rose 13 percent from 2009 to 2014, when adjusted for inflation.
     Indeed, U.S. airlines grew by 5.5 percent from January 2014 to January 2015, and earned a combined $19.7 billion in the past two years, as the price for jet fuel – the airlines’ single highest expense – dropped 34 percent, to $1.94 per gallon in April 2015, the plaintiffs say.
     Yet airfares continue to increase, and Sens. Charles Schumer, D-N.Y., and Richard Blumenthal, D-Conn., have called for an investigation, according to the complaint.
     “As a result of a series of mergers starting in 2008, defendants now control more than 80 percent of these seats in the domestic travel market,” the complaint states. “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.”
     The term “discipline” – a euphemism for limiting flights and seats, higher prices and fatter profit margins – repeatedly came up at the top airline executives’ annual meeting at the International Air Transport Association conference in Miami in June 2015, the plaintiffs say.
     There, Air Canada’s CEO, Calin Rovinescu, stated, “People were undisciplined in the past, but they will be more disciplined this time,” the New York Times reported.
     Spokesman Peter Fitzpatrick reportedly said Air Canada is “not adding capacity in an attempt to simply expand market share but instead focusing on profitable growth.”
     Again citing the article, the complaint says Yale economics Prof. Fiona Scott Morton, a former deputy attorney general in the Justice Department’s antitrust division, stated, “When airline industry leaders say they’re going to be ‘disciplined,’ they mean they don’t want anyone to expand capacity. And when there aren’t enough seats, airlines raise prices.”
     The plaintiffs say that “this year, the ‘discipline’ has been paying off,” as the Association estimates airline industry profits will more than double in 2015 to a record of nearly $30 billion.
     Delta has meanwhile “removed its schedule and fare information from over a dozen sites, including Trip Advisor Inc., Hipmunk Inc. and CheapOair.com,” the complaint states.
     “This is part of a broader push by defendants to restrict how – and whether – sites can use their fare and schedule data,” it continues.
     In a Travel Technology Association study, Morton wrote that the airlines “want to restrict the ability of the consumer to do price comparisons,” so U.S. travelers may end up paying $30, or 11 percent, more on the average airfare – i.e. $6.7 billion more annually – the plaintiffs claim.
     The Department of Justice confirmed earlier this month that it was investigating possible illegal coordination among the airlines, demanding copies of all their communications about the “undesirability” of increasing passenger-carrying capacity, according to the complaint.
     The complaint alleges violations of Sections 1 and 3 of the Sherman Act and demands a jury trial.
     The plaintiffs are represented by Denise Morris of Ademi & O’Reilly LLP in Cudahy, Wis.
     American Airlines’ Corporate Communications Senior Manager Joshua Freed commented, “We believe these lawsuits are without merit and will vigorously contest them. The airline industry remains highly competitive with more people flying than ever before. Demand has been enabled by a robust and competitive marketplace in which capacity has been added and average fares have decreased. This competitive landscape has greatly benefited air travel consumers.”
     Southwest meanwhile stated, “We’re aware of the suit and, as such, wouldn’t have any comment on pending issues of litigation.”
     Representatives of the other defendants did not immediately respond to a request for comment from Courthouse News.

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