Not sure if this belongs in the D&D. As a frequent traveler who watches ticket prices closely this is something that very much concerns me and something I've been suspecting. http://www.cnn.com/2015/07/01/politics/doj-subpoenas-airlines-unlawful-coordination/ DOJ subpoenas airlines over keeping ticket prices high Washington (CNN)The Justice Department has sent subpoenas to several major airlines as part of an investigation into "possible unlawful coordination" to limit capacity increases, and thereby keeping ticket prices high, a department spokeswoman said Wednesday. The department sent civil investigative demand letters to airlines on Tuesday, Justice spokeswoman Emily Pierce said. At issue is whether different airlines are coordinating to keep capacity -- the number of seats available on planes -- stable, having the effect of keeping ticket prices high. How the airlines have coordinated isn't immediately clear, but among the evidence that investigators is considering includes public comments by airline executives and industry analysts. In recent years, the Justice Department allowed two major airline mergers to take place -- including United and Continental, as well as American and U.S. Airways. Industry groups have cited the merging of airlines as an example of the business has gotten tougher for consumers. "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. 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," U.S. Travel Association President and CEO Roger Dow said in a statement. A United Airlines spokesperson confirmed to CNN that the airline has received a letter from the DOJ "and we are complying with their requests." American Airlines said they also had received notice from the Justice Department. "We welcome the review ... Demand has been enabled by a robust and competitive marketplace in which capacity has been added and average fares have decreased," a spokesperson for American Airlines said. "We will cooperate fully with the investigation and demonstrate that the last two years have presented an entirely new competitive landscape that has greatly benefited air travel consumers." A spokesperson from Southwest Airlines confirmed receiving notice from Justice and said, "We'll cooperate fully in answering any questions the (Justice Department) has of us." JetBlue said they have not been contacted for the investigation. The Associated Press first reported on the Justice Department investigation. Airline fees we love to hate
There might be some collusion regarding actual ticket fares, but regarding the oil prices not having an effect on lower ticket prices it may be due to poor business forecasting. A lot of these airlines might have made wrong bets on the price of oil and locked in elevated oil prices (via oil futures) at rates from a year ago or prior. I have heard SW Airlines has an active trading department in this regard.
ticket prices are so high ESPECIALLY out of IAH. We have multiple airports and airlines serving cities all over the US and we still pay outrageous amounts!
Collusion would be hard to prove. I do remember years ago before the consolidations that airlines monitored each others's pricing very closely, to be able match deals. I suspect that they still do. As long their competitors do not lower prices, they will not. I suspect that Southwest is gaining market share as we speak.
This investigation isn't directly about collusion in actual pricing. It's about potential collusion in limiting supply, which thus keeps prices higher by limiting empty seats.
This happening at the same time the big 3 U.S. carriers are collectively starting a protest movement against the 3 Gulf airlines adding lift to the USA is ironic.
Southwest is apart of the investigation. Who could have ever forseen this with all of those mergers....
Historically, Southwest has distanced themselves from the "legacy" carriers. After 9/11, they had enough cash to keep their fuel hedges and paid less for fuel for several years. During that time, they refused to follow fare increases and kept the other carriers from billions in revenue that would have helped them recover faster. I believe it accelerated the time frame of the (inevitable) mergers. Southwest was able to grow it's market share significantly during that period and became the largest domestic airline in the country. I'm not trying to be biased, but don't be surprised if Southwest is exonerated or determined to be the least offender in this investigation.
True collusion is almost always hard to prove without something like and an email between Delta execs and United actually saying they are working to keep prices high. Even without direct collusion the consolidation of airlines was guaranteed to start leading to higher prices and with fewer carriers there is more impetus to copy practices, and fees from each other. Also with the hub and spoke system there has been tacit cooperation between the airlines to not compete with each others hubs. In Minnesota Northwest Airlines practically ran the Minneapolis St. Paul airport as a fiefdom and there didn't seem much impetus for other airlines to expand flights.
Oil prices aren't really much related. The price of a ticket is not equal to the their costs plus a profit adder. The price is whatever the market will bear. And, with a constraint on seats, the market for available capacity will bear a lot. When the price of oil goes down, that's just money in their pockets. Now, having more money in their pockets might make some airline decide its time to take some market share, so they'd buy more planes, lower prices, and take customers. But they'd have to decide to do that. So, I'm not sure this 'discipline' really means collusion. These airlines are looking at a prospect of spending a lot of capex to buy more capacity and serving customers at lower unit revenues, and possibly flying with more empty seats. The alternative is to keep their capacity and prices where they are at and pay off travelers when they're overbooked. It might be that the returns of the current model look better than the returns on buying more planes. But, it also wouldn't surprise me at all if it were actual collusion. My simple fix is to allow foreign companies to fly domestic point-to-point flights. I'm sure we'd have a number of foreign companies perfectly willing to expand supply and push prices down.
I guess I'm wondering exactly what type of business doesn't do this. Flux capacitor manufacturers, maybe.
The average American male weighs 10lbs more than the average European male. And the average American female is 20lbs heavier than average European female. But yes still prices are high.
It would be tough to prove collusion since airlines all use pricing/capacity algorithms . Unless you found the memos saying "let's all so this" it would be easy to say they all just all strive for marketing efficiency independently. I think it is certainly fair for consumer to use technology for their own efficient use of time and money though: https://skiplagged.com/ https://www.techdirt.com/articles/2...r-who-helps-people-find-cheaper-flights.shtml
35 years I took a macro economics class in college, so that makes me a Internet expert IIRC supply and demand are dependent on each other. United et al are limiting supply (capacity) which keeps the prices (demand) high.
From booking airfare for vacations over the years, it appears if Southwest flies it the fares are low. I don't see Southwest as the problem here. They keeping the other major airlines competitive.
