Feds investigating airlines for collusion

Feds investigating airlines for collusion
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The Obama administration is investigating whether airlines are colluding to keep airfares high, The Associated Press reports

The Department of Justice is launching an investigation of potential antitrust law violations by airlines, after a string of high-profile mergers reduced the number of major U.S. carriers to about four, according to the report. 

A spokeswoman for the Justice Department told the AP that officials are looking for signs of "unlawful coordination" on flight prices by airlines. 

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Consumer groups have complained about the string of mergers that began around 2008, arguing that the consolidation of the airline industry has reduced the amount of competition for passengers that had been credited in past years for lower airfares. 

Some lawmakers have also called for a federal investigation into alleged anti-competitive behavior among airlines.

Sen. Richard Blumenthal (D-Conn.) said in a letter to the Justice Department last month that airlines are using the phrase "capacity discipline" as code for reducing the amount of available seats on flights to jack up demand — and prices. 

"At best, these remarks reflect participants in an overly consolidated market aligning supracompetitive fares," he wrote. "At worst, they may be a strategic attempt to coordinate behavior — specifically designed to encourage Wall Street to punish smaller rival airlines that have announced plans to expand capacity and cut prices."

Airlines have argued that the mergers were necessary to better compete with international competitors that are usually state-owned. 

The Justice Department sought for about a year in 2013 to block the most recent major airline merger, between U.S. Airways and American Airlines. But the DOJ ultimately relented after the companies agreed to give up the right to flights at airports in Washington, D.C., and New York City, which were historically difficult for low-cost airlines to gain access to.

The US Air-American combination was preceded by mergers between Delta and Northwest, United and Continental, and Southwest and AirTran airlines. The mergers have cut in half the number of major airlines that carry passengers in the United States.

"If not for the radical consolidation we have seen in the airline industry in the last few years, we probably would not even be having this conversation," U.S. Travel Association President Roger Dow said. "Now that four carriers control 85 percent of domestic routes, 'collusion' is a thought that's constantly going to be in the back of the minds of federal regulators."

— This story was updated at 3:45 p.m.