Justice Department eyes recent airline ticket price increases

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Justice Department eyes recent airline ticket price increases

NEW YORK (AP) =97 The Justice Department is scrutinizing the=20
$10-per-roundtrip fare increases made by the nation's largest airlines to=20
determine whether carriers violated an antitrust ruling enacted nearly a=20
decade ago. At issue is the way in which airlines make fare changes that do=
=20
not affect immediate travel, raising the possibility that they could signal=
=20
future pricing plans to competitors. "We are looking into it," Gina=20
Talamona, a spokeswoman at the department's antitrust division said Monday.=
=20
On Thursday, American Airlines raised non-sale fares on its North American=
=20
routes by $10 per round trip starting June 1. United matched the increase=20
the next day, and eight other carriers had fallen in line by late Monday.=20
The industry raised fares in anticipation of the government's upcoming=20
four-month suspension of security fees, which amount to $2.50 per flight=20
segment, maxing out at $10 per round trip. "Airlines were faced with two=20
choices: give consumers up to a $10 round-trip break, or raise fares," said=
=20
Jamie Baker, J.P. Morgan's airline analyst. "Not surprisingly, the industry=
=20
chose the latter."

Analysts and executives have said for months that the industry, which lost=
=20
$3.5 billion in the first quarter, needs to find ways to boost revenue even=
=20
as it struggles to cut costs. Fares have been kept extremely low to lure=20
anxious and penny-pinching travelers back to the skies. The fare increase=20
American launched on Thursday =97 the day its new chief executive said=
 higher=20
ticket prices were key to any recovery =97 is the first to succeed in 2003.=
=20
Some industry observers said they were surprised by the manner in which=20
fares were increased, suggesting that it may have violated the spirit, if=20
not the letter, of the law. A 1993 Justice Department ruling says, in part,=
=20
that carriers are prohibited from disseminating information about "planned=
=20
or contemplated fares or changes to fares." "They seem to have found a=20
loophole," said Terry Trippler, a travel consultant who closely follows=20
airfares. But Tim Wagner, an American spokesman, said "our legal department=
=20
has assured us that we are well within our rights" under the so-called=20
consent decree reached between the carriers and the Justice Department.

Wagner said the critical issue is that the American made the new fares=20
available through the computerized reservation systems Thursday, rather=20
than just announcing its intentions to raise fares at a later date.=20
"There's not a competitive advantage there ... we were higher than=20
everybody else," until the other carriers decided to match the fare=20
increase, Wagner said. Talamona, the Justice Department spokeswoman, would=
=20
not provide details about the agency's examination of the fare increases,=20
other than to say: "We'll look into this matter as we would any potential=20
violation of the consent decree." Clinton V. Oster, a professor at Indiana=
=20
University who specializes in airline economics and competition policy,=20
downplayed the hubbub. "The notion of the consent decree is to stop=20
signaling =97 which is, of course, silly," Oster said, "because there are=20
still lots of subtle and not-so-subtle ways to signal through the=20
computerized reservation systems."


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