(Rachel)
Following news that the Department of Justice opened an investigation into alleged collusion between major airlines to keep ticket prices high, it was only a matter of time before consumers began filing lawsuit against the major U.S. carriers.
Two groups of passengers have filed lawsuits against Delta, United, American and Southwest airlines alleging they colluded to keep fares high through a series of mega-mergers, The Hill reports.
The two lawsuits, filed late last week in Chicago and New York, accuse the airlines of a “conspiracy to fix, raise, maintain, or stabilize prices of airline tickets through a number of mechanisms.”
“This action challenges a collusion among major airlines to limit routes, information and available seats to keep airfares artificially high,” the New York-based lawsuit states. “Plaintiffs allege that defendants illegally signaled to each other how quickly they would add new flights, routes, and extra seats. To keep prices high on fares, it was undesirable for the defendants to increase capacity.”
Both suits seek class-action status. The Chicago lawsuit specifically seeks to represent all consumers who purchased tickets for domestic flights from October 1, 2012 to present. That complaint points to the airline industry’s quick and increased consolidation in recent years as evidence of collusion, Bloomberg reports.
The four airlines named in the lawsuits have undergone major mergers in the last decade and now reportedly account for 80% of all domestic air travel.
Back in 2008 Delta merged with Northwest Airlines; in 2010 Southwest acquired AirTran; United merged with Continental Airlines in 2012; and American and U.S. Airways finalized their merger in 2013 but have not yet combined all operations.
“This increased consolidation has hurt airline passengers,” according to the Chicago-filed complaint. “Defendants have, in tandem, raised fares, imposed new and higher fees on travelers and reduced their capacity and service.”
The New York lawsuit claims that airfares have remained higher despite the fact that costs for airlines have decreased since major mergers began.
“With suppression of routes, seats, and information, defendants can make even higher profits, because at the same time there has been a massive drop in the price airlines pay for jet fuel, their single highest expense,” the lawsuit states.
Airlines’ supposed bad behavior began to make headlines in recent weeks after Connecticut Senator Richard Blumenthal sent a letter [PDF] to Assistant U.S. Attorney General William Baer urging the DOJ to investigate possible collusion and anti-competitive actions in the airline industry that could result in higher airfares for consumers.
Blumenthal cited a recent report which found some airlines plan to cut back on the number of seats offered on certain routes in an attempt to boost profits.
“In light of the recent unprecedented level of consolidation in the airline industry, this public display of strategic coordination is highly troubling,” Blumenthal stated in the letter.
And just last week, the DOJ announced it had begun the investigation process, having already requested information from airlines as part of an investigation into “unlawful coordination.”
While the Dept. didn’t specify which airlines were being targeted, American Airlines CEO Doug Parker sent a message to employees over the weekend confirming receipt of the information request and assuring workers that the company had down nothing wrong.
“On behalf of your entire leadership team, let me be crystal clear: there has been no illegal behavior on the part of American Airlines,” Parker said in the letter. “We will comply fully with the demands of the [Civil Investigative Demand] and this fact will be proven.”
Bloomberg reports that Chicago-based United is also complying with the Dept. of Justice’s request for information, but declined to comment on the passenger lawsuits. Delta also declined to comment on the cases.
Neither Southwest, nor American representatives returned Bloomberg’s request for comment.
However, industry group Airlines for America tell The Hill that it is “confident that the Justice Department will find what we know to be true: our members compete vigorously every day, and the traveling public has been the beneficiary, as domestic fares are actually down thus far in 2015.”
Passengers sue airlines over allegations of price collusion [The Hill]
Top U.S. Airlines Conspire on Prices, Fliers Say in Suit [Bloomberg]
by Ashlee Kieler via Consumerist