Airfare terrorism

by Charlie Leocha on March 28, 2002

I can’t stand it. For years the airlines have been clearly engaging in price-fixing, but our government seems to feel that there is nothing wrong with it. The airlines have been clearly engaged in active predatory pricing, but the government doesn’t seem to have an adequate enough definition to prosecute what I see as blatant predatory activities.

Now, the Wall Street Journal and my local newspaper, The Boston Globe, both have published major stories that treat airline price fixing and airline-to-airline retribution for “not falling into line” with price “leadership,” as business as usual.

It is one thing when I, a columnist crying in the media wilderness, point out competitive problems within the airline industry. However, when fellow journalists begin to report on what should be considered criminal activities as normally accepted business procedures, I have to scream.

Call the cops. Until now, authorities have been asleep at the switch when airfares are concerned. And now that we, through out government intervention, have made generous gifts to the airlines, we have a right to be more vigilant than ever.

Newspapers call it a fare war. But, let’s take a closer look. We’ll see more of a Mafia-style protection racket in place with a battle between those who want payment and those who don’t want to pay.

Here is the front page story: American Airlines tries to lower the advanced-purchase requirements for business class travel (in effect, a back door price increase). Other airlines do not go along with the new rules. So, American Airlines, according to newspaper reports, retaliated against the airlines that were not towing the new advanced-purchase line by launching a low-fare attack on the other major airlines in an attempt to get them to cry, “Uncle.”

Unnoticed, it seems, by monopoly regulators, American Airlines only introduced these discounted $99 one-way fares in markets where they had competition. Where American has no competition, there were no bargains.

Delta and United succumbed to the pressure, but as I write this column, Northwest and US Airways are still sticking their three-day advanced purchase rule.

Northwest, counter-retaliated by announcing $198 round-trip three-day advanced-purchase fares in markets where they compete with American. According to reports by the Wall Street Journal, “American’s unrestricted fare for business travelers non-stop Dallas to Miami is $1,684 and $1,629 Dallas to LaGuardia.”

This is a big bucks battle. But for how long?

Where is the FTC? Where is the FAA? Where is the Department of Transportation? We, as passengers, can all be made to take off our shoes, wait in lines and drop our drawers in response to terrorism, but the government does absolutely nothing when the airlines engage in airfare terrorism.

It is not this way in any other industry in America.

When the FTC discovered that Staples Office Supply stores had higher prices where they were not in competition with Office Depot, a proposed Staples/Office Depot merger was scuttled as anti-competitive.

When Microsoft tried to raise prices on software which has no effective competition and then give away Microsoft software in order to drive competitors out of business, the FTC took action that is still being played out our courts.

Way back in 1972 when Wonder Bread would drop prices in neighborhoods where they had competition and make up the difference by raising the prices in neighborhoods where they had no competition, the FTC stopped them.

Tip O’Neill once noted that, “All politics is local.” For the major airlines the rule is “All prices are local.”

There is no rhyme or reason for airline pricing except base corporate greed.

The airlines charge what the local market can bear. They gouge the poor consumers where they have no competition and enjoy strong fortress hubs. Then the major airlines collude with supposed competitors to gouge as many flyers as they can in as many markets as possible.

Thank The Almighty for Southwest Airlines, Airtran, Frontier Airlines and Jet Blue Airways for providing the only bulwark against the major airlines’ miserable management, bad service and insatiable greed.

In study after study the FAA and FTC have observed that where major airlines have major hubs with little competition, prices are dramatically higher than at airports where competition between three or more airlines flourishes.

But the commissions and agencies that are charged with protecting consumers do nothing. And now with the newspapers rubbing these agencies’ bureaucratic impotence in their government noses, they still do nothing.

The airline industry, in America today, is like the Wild West before the sheriff came to town and rounded up the bad guys.

Now for the latest shootout at the JFK Corral -American Airlines has decided to launch new routes, this week, in direct competition with Jet Blue, between JFK and Oakland, California. Three airports serve that Bay Area market: Oakland, San Francisco and San Jose. Three major airports serve the New York City market: JFK, LaGuardia and Newark. Jet Blue only flies the JFK to Oakland route.

Just for fun, I went to www.aa.com in the late afternoon and checked the costs of flights the next day (these prices are for March 21, 2002, looked up at approximately 6 p.m. EST). Could American Airlines be selling their “competitive” fares at a loss in an attempt to drive Jet Blue out of business? It sure looks that way to me.

JFK to SFO (San Francisco) is $1,221.50
JFK to SJC (San Jose) is $1,221.50
JFK to OAK (Oakland) is $257.50
ERW to OAK (Newark NJ to Oakland) is $1,227.00
LGA to OAK (LaGuardia, NY to Oakland) is $1,221.50

Gary Cooper! John Wayne! FTC! FAA! Where are you when we need you?

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