Graham Warwick/WASHINGTON DC
The US Government is to take American Airlines to court over alleged predatory behaviour at its Dallas/Fort Worth, Texas, hub. The US Department of Justice (DoJ) charges that American repeatedly sought to drive start-up airlines out of D/FW by adding flights and cutting fares, then reducing service and restoring prices after it had driven out the new entrant.
The anti-trust lawsuit, filed against American and regional AMR Eagle in a Wichita, Kansas, court, focuses on the carriers' responses to the entry of Sun Jet, Vanguard Airlines and Western Pacific on routes out of D/FW to Wichita, Kansas City, Long Beach and Colorado Springs. Sun Jet left the Dallas market in 1997 and Western Pacific closed year.
The lawsuit accuses American of trying to monopolise services to and from D/FW, where it is the dominant carrier with 70% of the nonstop passenger market. "Without competition, hub carriers will charge high fares on routes they dominate," says Joel Klein, head of the DoJ's anti-trust division. "Hub carriers cannot be permitted to use predatory tactics to keep new entrants out ," he adds.
The DoJ alleges that American's conduct was predatory "because the costs of flights it added exceeded the revenues they generated. American expected to recoup those temporary losses, however, by charging higher fares after [the low-cost carrier] ceased operations." The DoJ says American typically reduced service and raised fares to monopoly levels once new entrants were forced out.
Describing the lawsuit as "meritless", the airline says the DoJ is trying to "punish American for simply matching the fares set by the competition and then providing enough seats to meet consumer demand". The carrier accuses the government of seeking to "take away from consumers the ability to choose between two competitors. Instead, it would create a special class of competitors to be protected from competition."
Vanguard says its complaints have been "vindicated" by the DoJ. The low-cost carrier plans to begin flights between Chicago and Buffalo, a route served by American.
The US Department of Transportation has proposed guidelines on predatory behaviour and there are reports that the DoJ is investigating complaints against other hub-dominating carriers, including Delta Air Lines at Atlanta, Northwest Airlines at Detroit and Minneapolis and United Airlines at Denver.
Source: Flight International
