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Major airlines under investigation for collusion

Mark Garrison Jul 2, 2015
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Major U.S. airlines — including American, Delta, United and Southwest — are now under investigation. The Justice Department is looking into whether they’re illegally working together to keep ticket prices up. It’s a high-stakes case with impact for Washington and Wall Street, but more importantly, for the wallet of anyone hoping to get a decent deal on a plane ticket.

Don’t count on a smoking gun tape of back-slapping, whiskey-drinking airline bosses fixing prices in a back room. (If there is, they could go to jail.) The case probably won’t be that simple. What we do know is that airline execs have recently talked loudly and publicly about cutting flights and limiting seats, moves that can boost ticket prices.

“It would be hard to make out a compelling antitrust case if that’s all [investigators have],” says NYU Law Professor Scott Hemphill, who was previously chief of New York’s antitrust bureau. “DOJ’s guess here must be that where there’s smoke, there’s fire and that when they take a deeper look that there’s more that they might find.”

Investigators are demanding copies of airline correspondence related to capacity. They’ll look for signs of illegal coordination in private communication among airline execs or for evidence that they used third parties to pass messages to rival carriers.

Whether what federal investigators find is ultimately legitimate business practice or dark conspiracy, low fuel costs are pushing down ticket prices anyhow.

“Fares are rather high at the moment, even though fuel is cheaper,” says Seth Kaplan, editor of Airline Weekly. “But that never lasts very long and in fact it’s changing even as we speak.”

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