Airfare from London area to Washington DC in July - why the massive increase?

Upvote:3

Could well be illegal price-fixing - in other words, a cartel.

US airlines face a price-fixing probe amid allegations that they colluded to keep fares high.

The US Justice Department confirmed that it is investigating some carriers over "possible unlawful coordination".

The Business Travel Coalition welcomed the move by the Department if Justice which could prove “illegal co-ordination” to restrict capacity in domestic US, transatlantic and other international markets.

US airlines in competition probe over alleged price-fixing, travelweekly, 2 July 2015

"We are investigating possible unlawful coordination by some airlines," Justice Department spokeswoman Emily Pierce confirmed to USA TODAY

Airline 'capacity discipline' in spotlight after Justice probe, USA Today, 1 July 2015

Now, the surviving quartet of US airline giants – American, Delta, United and the discounter Southwest – are coming under increased scrutiny for “unlawful coordination” on price-gouging. But airline insiders and legal analysts say the government’s case against the industry will be near-impossible to prove – indeed, that the feds have known about potential ticket schemes for years and have not been able to fight back against lobbyists fighting to bring the transportation business back from the post-9/11 brink.

“It’s de facto collusion,” said Charles Leocha, president of Travelers United, a consumer advocacy group. “Flights are full, and the airlines have become very good at signaling their strategy” to their not-so-arch rivals, he added.

Airline collusion: it's nothing new and will be difficult to prove, analysts say, The Guardian, 3 July 2015

“When airline industry leaders say they’re going to be ‘disciplined,’ they mean they don’t want anyone to expand capacity,” said Fiona Scott Morton, professor of economics at Yale and a former deputy attorney general in the antitrust division of the Justice Department. “And when there aren’t enough seats, airlines raise prices. That’s what we’ve been seeing.”

Christopher L. Sagers, an antitrust professor at Cleveland-Marshall College of Law and an airline industry specialist who opposed the American-US Airways merger in testimony before Congress, said that sort of talk at a conference of direct competitors in a concentrated oligopoly is a huge legal risk.

“I don’t see a smoking gun,” Mr. Sagers said. “But they’re all but saying you need to limit output to keep up prices.”

... Professor Scott Morton recently co-wrote a study of airline industry competition that concluded the major airlines were stifling competition by restricting the ability of consumers to use the Internet to compare airfares.

‘Discipline’ for Airlines, Pain for Fliers, New York Times, 11 June 2015

There's a pretty strong history of price-fixing in the airline industry, and on UK<->US routes specifically, if I remember correctly. So if this is price-fixing then it wouldn't be at all unprecedented.

It's pretty clear that the airlines are working together to keep capacity down (and therefore keep prices and profitability up), whether or not that actually constitutes price-fixing according to the legal definition.

More post

Search Posts

Related post