The government is investigating allegations that there is price-fixing going on among the major airline companies.
The Justice Department has launched an investigation into the major airline companies on allegations that they are colluding in order to drive up ticket prices and gouge customers.
Airlines often increase flights due to demand or cut routes because of a lack of demand, but the federal government believes they may be going beyond simple supply and demand decision-making to collaborate and limit flights, leading to an increase in fares, according to an Associated Press report.
The feds kicked off the investigation by firing off letters to the largest carriers in the country: Delta, Southwest, United, and American Airlines, which together control 80 percent of all seats available to customers. While airlines decline to reveal the rationale for their pricing decisions, some analysts and airline executives have talked about how they keep passenger capacity for individual flights at their optimal level, thus ensuring maximum profits. Keeping this capacity as high as possible allows the airlines to charge the maximum price per seat.
This in and of itself is not illegal and is in fact the normal practice of businesses simply seeking to be more efficient, but the Justice Department believes they are going beyond that by essentially agreeing to avoid competing with each other in order to maximize profits. However, they will have a very difficult time proving that, experts believe.
There’s still a long way to go with this investigation so it’s anybody’s guess where it’s headed, but if the government can prove collusion, it could force the airlines to avoid such behavior and may even require public declarations on their intended capacity goals.