Because of bankruptcies and mega-mergers over the past decade, the United States has gone from nine major airlines to four — Delta, Southwest, American and United — and those four fly about 80 percent of all domestic passengers. So 14 years after the 9/11 attacks nearly drowned the airline industry in red ink, the limited competition has helped airlines post some of their biggest profits in history. American, for example, which just merged with US Airlines, just logged $1.2 billion in profit, its most profitable three months ever.
I don’t begrudge these guys making a profit, but with only four airlines, it becomes very easy to collude. They have a joint interest in keeping capacity tight, which they can now do, and keep prices up. And it is fairly easy to “signal” each other of their intentions.
So this is a welcome development:
The U.S. government is investigating possible collusion between 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, theairlines 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.