Did Airlines Collude to Keep Air Fares High?
For months now, oil and gas prices have been dropping—and that includes jet fuel. So why haven’t airline ticket prices dropped as well? That’s one of the questions the Justice Department wants answered as it investigates the possibility of collusion among carriers to keep airfares high.
The DOJ also wants to know if companies conspired to limit the number of available seats in order to drive prices up. Yesterday, the Associated Press broke the news that major U.S. carriers had received a letter demanding copies of all communications the airlines had with each other, Wall Street analysts, and major shareholders about their plans for passenger-carrying capacity, going back to January 2010. The civil antitrust investigation is focusing on whether airlines illegally indicated to each other how quickly they would add new flights, routes, and extra seats in an effort to prop up ticket prices.
Related: 6 Sneaky Fees That Are Making Airlines a Bundle
Just minutes after the news broke, stocks of the major U.S. airlines fell four to five percent, with the S&P 500 airlines index off more than four percent. Until now, the U.S. airline industry had been enjoying record profits, due to increasing numbers of Americans flying and a huge drop in the price of jet fuel. In April, the price of jet fuel was $1.94 per gallon, a decrease of 34 percent from the previous year.
The investigation marks a notable shift for the Justice Department, which approved the merger of American Airlines and US Airways back in November 2013, despite previously blocking it over concerns that the airlines would collude on fares. The probe could signal a more aggressive approach on antitrust enforcement, under the strong leadership of Loretta Lynch, who was confirmed in April.
Justice Department spokesperson Emily Pierce confirmed that the department was investigating potential “unlawful coordination” among some airlines.
Just two weeks ago, U.S. Senator Richard Blumenthal (D-CT) urged the Justice Department to investigate what he called “anti-competitive, anti-consumer conduct and misuse of market power in the airline industry.”
Related: United Airlines Bullish on First Quarter from Lower Fuel Costs
Since 2008, various mergers have resulted in four major airlines (down from nine)—American, Delta, Southwest, and United—controlling about 80 percent of all domestic air travel. All four airlines have confirmed that they received the letter and that they were cooperating with the investigation.
According to Bureau of Transportation Statistics, the average domestic airfare rose 13 percent from 2009 to 2014 (adjusted for inflation). The average domestic flight last year cost $391. In the past year alone, airlines received an additional $3.6 billion from bag fees and another $3 billion from reservation-change fees. All of the major airlines—American Airlines, United Continental Holdings, Delta Air Lines, Southwest Airlines, JetBlue Airways, and Alaska Air Group—posted record profits with a consolidated net income of over $3 billion during the first quarter of 2015.
Quote of the Day - October 16, 2017
Speaking at a cabinet meeting on Monday, President Trump said:
"Obamacare is finished, it's dead, it's gone ... There is no such thing as Obamacare anymore."
Click here for the video.
Poll: Trump Tax Cuts Favor the Wealthy; Deficit Should Be Higher Priority
Trump and the GOP still have work to do if they want to convince Americans that their tax plan won’t mostly help the rich. A CBS News Nation Tracker poll released Sunday finds that 58 percent say the tax reforms being discussed favor the wealthy, while 19 percent say it treats everyone equally and 18 percent say it favors the middle class.
The poll also found that 39 percent say that cutting the deficit should be a priority, even if it means taxes stay the same. About half as many people said cutting taxes should be prioritized even if the deficit rises.
The poll, conducted by YouGov, surveyed 2,371 U.S. adults between October 11 and 13. Its margin of error is 2.5 percent.
Coporate Tax Cut Could Be Phased In
House tax writers (at least some of them) are worried that slashing the corporate tax rate found will push the deficit higher in a hurry – an analysis by the Tax Policy Center found that cutting the rate to the stated goal of 20 percent would cost $2 trillion over a decade. One way to soften the fiscal blow would be to phase in the reduction over three to five years. House Republicans say such an approach would reduce the size of the lost revenue by half.
Larry Summers: GOP Tax Claims Are 'Made-Up'
Former U.S. Treasury Secretary Lawrence Summers isn't happy with the Republican tax plan, and it's not just because he has a different set of ideas as a Democrat. More fundamentally, he says Republicans are making false claims: “When you have -- and I hate to be in a position of using this word about our government -- when you have senior economic officials making claims that are made-up ... it’s very hard to have a dialogue, and compromise, and get to a good place.”
Summers is also worried about the effects of a tax cut for the rich during a time of considerable social turmoil: “There’s a lot of unhappiness and anger out there … It’s really hard to see why focusing a corporate tax cut on those at the very high-end is going to do much to assuage that anger.”
How Much Did Mike Pence’s NFL Walkout Cost Taxpayers?
Vice President Mike Pence’s decision to attend an NFL game between the Indianapolis Colts and San Francisco 49ers yesterday and then leave after some 49ers players kneeled during the national anthem was quickly criticized by some as a planned piece of political theater — and a somewhat expensive one at that. “After all the scandals involving unnecessarily expensive travel by cabinet secretaries, how much taxpayer money was wasted on this stunt?” Rep. Adam Schiff (D-CA) tweeted Sunday afternoon.
The answer, CNN reports, is about $242,500: "According to the Air Force, flying a C-32, the model of plane used for Air Force 2, for one hour costs about $30,000. Pence's flight from Las Vegas to Indianapolis Saturday took about three hours and 20 minutes, so it cost about $100,000. Pence then flew from Indianapolis to Los Angeles on Sunday, which took about four hours and 45 minutes, costing about $142,500."
President Trump defended Pence’s trip, tweeting that it had been “long planned.” CNN also reports that some of the costs of Pence's flight from Indianapolis to Los Angeles will be paid back by the Republican National Committee because the vice president is attending a political event there.