photo by Flazingo Photos
via Flickr
New types of airline partnerships may be arising these days, but apparently cooperation between airlines isn’t always legal — at least not according to Connecticut Senator Richard Blumenthal, who has asked the Department of Justice (DOJ) to investigate what’s going on in the aviation industry.
Collusion is the charge, and it’s allowed North American-based airlines to artificially raise fares and profits by limiting capacities and expansion, the senator says, and he offers evidence to back it up, beginning with comments made by airline chief executives at an International Air Transport Association meeting in Miami earlier this month.
The airlines prefer to call it “discipline,” and it became the buzzword of the conference, echoed in statements outside of it, too. As Air Canada’s chief executive, Calin Rovinescu told Reuters not long before the Miami meeting, “People were undisciplined in the past, but they will be more disciplined this time.”
For some industry watchers, the meaning of “discipline” also contains a lesson, from the days when North American airlines preferred to bloody each other. Nowadays, the invasion of international carriers into the market has taught them it’s better to cooperate.
“In light of the recent unprecedented level of consolidation in the airline industry, this public display of strategic coordination is highly troubling,” Blumenthal said in his letter, alluding also to the dangers of consolidation in the market, like the US Airways-American Airlines merger that left only four major carriers — American, United, Delta and Southwest — in control of more than 80 percent of the domestic market.
The letter also points to a reversal of declared expansion plans by Southwest after industry pressure as another example of anti-competitive policies. While the airlines are far from being proven guilty of anything (beyond the ever-increasing squeeze on seat space, disappearance of amenities, and drop in service) the charges do seem at least worthy of investigation, especially in light the gargantuan salaries and compensation of airline executives, which now reach up to $17 million per year.
“I urge you to use all the tools at your disposal to punish this anti-competitive and anti-consumer behavior,” Blumenthal stresses to the DOJ, “Consumers are paying sky-high fares and are trapped in an uncompetitive market.”