US DOJ analysis focuses on need for consumer protections in commercial air transport
WASHINGTON, DC – The complaint of the U.SDepartment of Justice (DOJ) and the State Attorney General highlights a number of statements by US Airways’ executives confirming that the past consolidati
WASHINGTON, DC – The complaint of the U.SDepartment of Justice (DOJ) and the State Attorney General highlights a number of statements by US Airways’ executives confirming that the past consolidation in the airline industry has already conferred on airlines the power to impose higher prices and new and higher fees. This has resulted in the DOJ filing a lawsuit to attempt to block the American Airlines-US Airways merger.
The Business Travel Coalition (BTC) today responded very positively to news that the US Department of Justice (DOJ) and six State Attorneys General have sued to block the proposed merger between American Airlines and US Airways. DOJ’s legal complaint states: “In recent years… the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a high price.” DOJ shines a spotlight on how uncompetitive and cozy U.S. airlines have become.
“As BTC testified in Congress regarding the merger on February 26, 2013 in its written testimony (http://btcnews.co/18s8Ol3), and especially in its verbal testimony (http://btcnews.co/1a1XiRm), there is a coordinated airline war on consumers and price transparency,” stated BTC Chairman Kevin Mitchell. “Airline CEOs testify that the fare transparency and comparison-shopping enabled by the current system, and especially the online travel companies, will be more than adequate to protect competition and consumers from the consequences of radical industry consolidation. They justify their mergers on fare transparency in one breath, and then turn to kill it off by withholding fees for ancillary services from travel agencies in the next breath, or by attempting to impose a new anti-competitive system for the worldwide pricing of tickets, as embedded in the International Air Transport Associations Resolution 787,” added Mitchell.
The International Air Transport Association (also called IATA) is the worldwide trade association for airlines and represents 240 carriers accounting for 84% of worldwide passenger traffic. Resolution 787 is an agreement among all those airline competitors that includes a radical change in how tickets would be sold. Under Resolution 787, fares would no longer be published and available for any and all consumers to comparison-shop anonymously so they can find the best fares. Instead, under the new model that IATA is spearheading, airlines would determine the price depending on exactly who is asking, and the Resolution calls for consumers to surrender very intrusive information to get fare quotes, including their name, the purpose of the trip, age, marital status, nationality and past purchasing behavior. The Resolution is meant to supplant the current fare transparency that has benefited consumers with a regime of fare shrouding so that airlines can take up fares and fees even further.
To ameliorate the harm to consumers that flows from this airline pricing power, and in fact to prevent even more grievous injury to consumers in the future, the US Department of Transportation (DOT) should promptly reject the pending request by IATA for approval of Resolution 787. DOT should also proceed promptly to issue its long pending rule on disclosure of airline fees and charges and require airlines to make full, fair and timely disclosure of their extra fees and charges through all outlets that they have agreed can sell their tickets.
Download a joint BTC/American Antitrust Institute analysis of the proposed merger at http://btcnews.co/1684c3A.