US probing whether airlines collude to keep airfares high

An American Airlines plane taxis past other American Airlines McConnell Douglas MD-82 planes standing by gates at LaGuardia Airport in New York.
An American Airlines plane taxis past other American Airlines McConnell Douglas MD-82 planes standing by gates at LaGuardia Airport in New York.PHOTO: BLOOMBERG

WASHINGTON (REUTERS) - The US Department of Justice said on Wednesday it is investigating whether US airlines worked together illegally to keep airfares high by signaling plans to limit flights.

The Justice Department wrote to major US air carriers demanding that they detail decisions to limit the number of seats they offer, and what they've said about those plans to investors, securities analysts and the public.

Airlines contacted have been asked to provide "available seat miles on a regional and system wide basis" back to January 2010 and a raft of other data.

The top four US carriers American Airlines, Delta Air Lines, United Continental and Southwest Airlines control some 80 per cent of the domestic air travel market.

The four confirmed receipt of the regulator's letter and said they are cooperating fully with the investigation. News of the probe sent the Dow Jones U.S. airlines index down 2 per cent on Wednesday.

Shares of the US carriers have gyrated in recent weeks as investors questioned whether they were planning to add capacity at a pace faster than overall economic growth, which could put downward pressure on fares.

Southwest fueled investor jitters about declining profit margins in May when it unveiled plans to boost capacity by as much as 8 percent this year from 2014, although it later revised the expected increase to 7 per cent.

But carriers have started taking flights off their fall schedules and postponing aircraft deliveries in response to Wall Street concerns that adding more flights and seats could erode fares and margins.

Mergers, new fees imposed on passengers and caution about adding capacity have boosted U.S. airline earnings after a decade of bankruptcies following the September 11, 2001 attacks. In the past year, tumbling oil prices have helped the carriers post billion-dollar profits.

The probe focusing on whether the top U.S. carriers are colluding domestically comes as some of the same airlines complain that foreign rivals are competing unfairly on some overseas routes.

US carriers have asked the Obama administration to freeze access to US airports by three Gulf airlines for allegedly receiving state subsidies. The Gulf airlines deny that they have received subsidies in violation of trade agreements.

The US airlines also have fought plans by low-cost Norwegian Air Shuttle ASA to expand its US. flights under an Irish subsidiary, with claims that it will undermine wages and working standards.

Consumer advocates and some lawmakers praised the Justice department action focusing on domestic fares.

The airlines and their defenders say ticket prices have fallen in 2015 while capacity this summer has reached a post-recession high.

"Our members compete vigorously every day, and the traveling public has been the beneficiary," trade group Airlines for America said in a statement Wednesday.

Separately, Connecticut's attorney general sent letters to the four carriers last week asking whether they have coordinated prices, citing recent statements at an industry conference held last month in Miami.