U.S. probing possible airline collusion to keep fares high

By David Koenig, Scott Mayerowitz and Eric Tucker, Associated Press

Wednesday, July 1, 2015 | 11:40 a.m.

WASHINGTON — 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, the airlines 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.

This year could lead to even higher profits thanks to a massive drop in the price airlines pay for jet fuel, their single highest expense. In April, U.S. airlines paid $1.94 a gallon, down 34 percent from the year before.

Koenig reported from Dallas, Mayerowitz from New York.