Airlines Battered On Revelation Of Possible Collusion

The investigation has received mixed responses from various groups, and analysts are considering it an investigation without any merit. According to the data compiled by Bloomberg, the average domestic fares were down by 4.9% in May and the competition among airlines has heated up at Dallas, Chicago, and Seattle’s airports, as mentioned by Helane Becker of Cowen & Co. Major airline groups like Airlines for America have come forward after the announcement in defense of the industry, with the aforementioned group releasing a statement saying, “We are confident that the Justice Department will find what we know to be true: our members compete vigorously every day, and the traveling public has been the beneficiary.”

On the other hand, the Bureau of Transportation Statistics released figures indicating that average domestic fare has grown by 13% between 2009 and 2014, after adjusting for inflation. In addition to the fares, airlines have introduced several new fees, which lead to a collection of $3.6 billion in bag fees and $3 billion in reservation change fees over the last 12 months. Further, the airlines reported 84.5% of seats filled on domestic flights during the last year. Institutions like the American Antitrust Institute are supporting the decision, with Diana Moss, Vice President of the American Antitrust Institute saying “For the benefit of the American consumer and competition, this is an important move that the DOJ is making.”

In general, higher seat bookings and limited growth in airline seats is a strategy supported by investors, as it allows airlines like JetBlue Airways Corporation (NASDAQ:JBLU) and Delta Air Lines, Inc. (NYSE:DAL) to avoid oversupplying the market with seats and maintain higher profit margins.

Disclosure: None