American Airlines Settles Fare Collusion Lawsuit for $45 Million

Jun 16, 2018

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The fare collusion lawsuit against the four largest US-based airlines is heating up. After the airlines repeatedly failed to get the case thrown out, Southwest settled in January 2018 for $15 million — and agreed to cooperate with plaintiffs. Now, American Airlines is settling the case for $45 million with a similar required flip against the remaining airlines.

The lawsuit alleges that the airlines started colluding in 2009 to keep capacity artificially low in order to raise average fares. The case points to stagnant capacity growth and rising airfares in a time of falling oil prices in the period after this agreement.

This anti-trust case (In re Domestic Airline Travel Antitrust Litigation, 15-mc-1404, U.S. District Court, District of Columbia) is a combination of 105 separate cases brought by more than 150 plaintiffs. These cases were filed starting in 2015 after the Department of Justice began investigating similar fare collusion claims.

In a 2016 decision to reject the airlines’ request to throw out the case, the judge wrote:

Starting in 2009, the industry experienced limited capacity growth. Notably, as defendants’ executives acknowledged, this restriction on growing capacity was a marked change within the industry. The court is satisfied that at this stage, plaintiffs sufficiently pled parallel conduct.

In a statement, an American Airlines spokesperson points out that “costs to defend against antitrust litigation often run into the tens of millions of dollars.” During the multi-year suit, the airlines’ unsuccessful attempts to get the case thrown out has likely racked up this cost already. Depending on how many “tens of millions of dollars” the airline is referring to, it seems illogical to settle for $45 million when you’re sure you’d win while spending less.

As part of this settlement, American Airlines agrees to cooperate as the lawsuit continues against Delta and United — both of which maintain they’ve done nothing wrong.

In a statement to Bloomberg, Delta spokesman Morgan Durrant put the company’s stance bluntly: “The assertion that our success is due to anything but the hard work of our people is offensive.” Then again, Delta has been caught lying to the press in the past.

The escalating settlements — from Southwest’s $15 million to American’s $45 million — and both Southwest and AA’s requirement to cooperate indicate the plaintiffs are gaining increasing evidence against the remaining airlines.

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