Summary: A discussion between airlines CEO’s about capacities limits sparks a U.S. government investigation to figure out if the airlines have been conspiring together.
The Justice Department is trying to determine if a communication between airlines existed to limit seats on flights in order to keep prices high. The civil antitrust investigation is focusing on if the airlines were alerting each other to when they would add new routes, flights, and extra seats.
All the major U.S. carriers such as American Airlines, Southwest Airlines, United Airlines, and Delta Air Lines received letter requesting documents containing any communication on passenger-carrying capacity or what would happen if other airlines increased capacity between them, major shareholders, and Wall Street analysts. They also requested the passenger-carrying capacity overall and by region for each airline going back to January 2010.
News of the investigation sent the stock for each airline down 1 to 3 percent on a day when the rest of the market went up. The Justice Department looked into investigating after hearing that the airlines discussed capacity at the annual International Air Transport Association meeting in Miami last month.
Wall Street analysts have suggested that the airlines not grow their capacities faster than the U.S. economy so the airlines have made sure not to between 2010 and 2014. Since 2014 airlines have grown by 5.5 percent while the economy has only expanded by 2.4 percent.
The Wolfe Research analyst who hosted the association, Hunter Keay, doesn’t think that the companies took part in “unlawful coordination” and instead were just responding to the analyst community.
Photo: gbaa.org