Airlines dance carefully around price-fixing
NEW YORK - A major airline - on Thursday, it was American - raises fares.
Quickly, several others - Continental, Northwest, United, Delta and US Airways by Friday - follow suit.
It happens all the time, the world’s airlines seemingly joined in a dance of rising and falling prices for your round-trip ticket to Omaha, or Pittsburgh, or maybe Sacramento.
How do the airlines manage to stay in step - and are they at risk of violating price-fixing laws?
Airlines, travel agencies and other related businesses track fare information through Airline Tariff Publishing, a company that gets the latest prices from most major airlines and sends them through cyberspace three times a day. When airlines spot a change by their competitors, they often react, and quickly.
That’s what American Airlines’ rivals did Thursday and Friday, raising round-trip domestic fares by $20 to help blunt record fuel prices. American’s fare increase was at least the seventh by a major carrier since Sept. 1.
“No airline wants to find themselves at a competitive disadvantage with a fare that’s too high,” says Terry Trippler, an airline expert at TripplerTravel.com. “Nor do they want to find themselves at a financial disadvantage if the competitor has a higher fare and they believe they need to get that same kind of money.”
The bottom line, according to Trippler: “The airline industry has for years always been a monkey-see-monkey-do type of industry.”
The Justice Department and other government agencies around the world are always watching the airlines for price-fixing - the phenomenon of vendors getting together to agree on a certain price for goods or services in a specific market.
As recently as August, British Airways and Korean Air were fined $300 million each after they acknowledged colluding over cargo rates and fuel charges.
But what about those “monkey-see-monkey-do” fare changes? If airlines’ prices match one another precisely, is price-fixing going on?
As long as the airlines are simply reacting to one another’s price changes, Trippler says, everything stays nice and legal.
“If they got together and decided that this is what they would do, in advance - that’s when you get into the price-fixing setup.”
Information from Bloomberg News about the airlines matching American’s increase
is included in this report.