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Feds Investigating Whether Airlines Are Colluding to Screw Us Over

Are you paying sky-high prices for domestic ticket prices this long weekend? There may be a reason for that.

by VICE News
Jul 2 2015, 6:00pm

Photo by Lynne Sladky/AP

As thousands of Americans prepare to hop on planes for a long fourth of July weekend, the US Justice Department has launched a probe into four major airlines, claiming they may have colluded to keep plane ticket prices high by limiting seating, thereby raising demand.

Federal investigators are looking into whether the unnamed airlines deliberately arranged with one another in what Justice Department spokeswoman Emily Pierce described as "potential unlawful coordination." Pierce declined to comment further.

Currently, in the US, four major airlines — American, Delta, Southwest, and United — control 80 percent of the industry, following a series of mergers that began in 2008. Despite opposition by consumer advocates, the mergers were green-lit by the Justice Department.

At the time of the mergers, William J. Baer, assistant attorney general for the department's antitrust division, was quoted as telling reporters that the mergers would open up the marketplace and "disrupt today's cozy arrangements" between major airlines, according to The New York Times.

But recently, reported the Times, major carriers have been speaking with analysts on Wall Street about the limiting of flights — or "capacity discipline," in industry speak.

The mass control over ticketing and prices of these airlines has meant an average rise in the base domestic airfares of roughly 13 percent between 2008 and 2014, according to the Bureau of Transportation Statistics. 

The base fare does not include extras such as a $25 checked baggage fee for some customers, the minimum $200 to change ticket dates, or cancellation fees. The airlines reportedly reaped $3.6 billion in bag fees alone and $3 billion from customers who changed their flight schedules in the last year, according to The Associated Press.

Customers may also be familiar with paying for extras such as meals, in-flight entertainment, and WiFi on some flights. All of these auxiliary fees, together with ticket prices, have brought in a combined record-breaking $19.7 billion for US airlines in the past two years.

This week, the Justice Department requested airlines hand over all documents from the past two years related to seat limiting. The inquiry followed a call last month from Connecticut Senator Richard Blumenthal for the Justice Department to investigate whether airlines had been engaging in anticompetitive behavior, as their profits continued to soar.

Airline profits are expected to continue to rise as fuel prices drop in coming months.

In separate statements on Wednesday, American, United, and Delta said they were cooperating with investigators, while Southwest Airlines did not immediately respond to a request for comment, according to the Times.

The Associated Press contributed to this report.