Updated with statements from American Airlines and Delta Air Lines
The US Department of Justice is investigating the possibility of collusion between US airlines on domestic capacity growth.
“We are investigating possible unlawful coordination by some airlines,” confirms a Justice department spokeswoman who declines to comment further.
Letters were sent to a number of carriers requesting all communications with other airlines, as well as with Wall Street analysts and major shareholders, at the end of June, the Associated Press first reported.
American Airlines received a demand from the DOJ for all "documents and information from the last two years that are related to statements and decisions about airline capacity", a spokesman says.
"We welcome the review as the data shows that the industry remains highly competitive with more people flying than ever before," he says. "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."
Both Delta Air Lines and United Airlines confirm that they received the request from the antitrust regulator and are fully cooperating.
The investigation comes even as analysts and airline executives warn of excessive capacity growth this year. Available seat miles (ASMs) are expected to grow at between 5.5% and 6% in the second and third quarters – a level at least two percentage points higher than the forecast for US economic growth – various Wall Street analyst reports show.
“In 2015, domestically, capacity is going to be up 5%, 6% this year,” said Scott Kirby, president of Fort Worth, Texas-based American, in May. “GDP [gross domestic product] is going to grow much less than that [and] industry RASM [revenue per available seat mile] is going to be down, even domestically… I think most people define ‘capacity discipline’ as supply aligned with demand – it’s not aligned in 2015.”
Analysts have made similar warnings, though they almost universally agree that the financial benefit of low oil prices will likely outweigh any weakness in demand that results from excessive growth at airlines this year. Unit revenues will decline but margins and profits will rise.
American, Delta and United all plan to grow capacity at 2% or less this year. Southwest Airlines, the largest domestic carrier, anticipates roughly 7% ASM growth.
The four carriers together control more than 80% of the US domestic market.
The DOJ’s investigation comes less than two years after it approved the merger of American and US Airways, the last such combination among the US big three. It made the carriers divest gates and slots at key airports, including Dallas Love Field, New York LaGuardia and Washington National, in order to foster competition in the market.
JetBlue Airways, Southwest and Virgin America were able to acquire those assets and expand their operations.
The investigation also comes as Delta and United are seeking antitrust approval for separate slot deals at Newark Liberty International and New York John F Kennedy International airports. United plans to shift its JFK slots to Delta in exchange for some of the latter’s slots at Newark under the deal.
Southwest declines to comment.
Source: Cirium Dashboard
