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Published on : Friday, April 8, 2016
American Airlines, Delta Air Lines and United Airlines may have recently coordinated on a complicated and comprehensive scheme to change airfare rules that have the effect of driving up the price of an airline ticket on unsuspecting consumers by as much as a factor of seven.
How The Policy Change Works
The policy change bars customary multi-city ticketing using the lowest available fare on each segment. Instead, the new policy combines the highest refundable fares available on each segment and returns a round-trip single price that is substantially higher than if a consumer purchased separate one-way fares.
Why This Policy Is Outrageous
Since the Big Three secured grants of antitrust immunity for their global alliances, and consolidated the domestic industry, they have worked hammer and tongs to reduce price transparency, undermine their regulator and block foreign carrier new entry.
This fare-rule change appears worse than tacit coordination as there was no public announcement and airlines don’t usually spend their time watching the Airline Tariff Publishing Company (ATPCO) feeds for such very infrequent changes. In the off chance two of the three airlines were monitoring ATPCO and spotted the change, which is complex and far-reaching, they would have likely needed considerable time to analyze the competitive move and decide whether to match.
Normally, with a policy change of this magnitude, airlines would watch how the market responds before taking a risk. Moreover, because it was implemented secretly, there was no immediate threat of revenue loss, and thus no need to rush to match. Taken together, this is why Business Travel Coalition asked the U.S. Department of Justice to add this industry development to its ongoing investigation into collusive airline agreements.