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(c) Elliott Publishing.

DOT Collusion
Cheap Charlie · March 5, 2001

Only in America can we find the government stretching to discover monopoly activity in the emerging world of software, computers and the Internet, while ignoring the blatant and fully documented monopoly activities of the airlines.

United Airlines and American Airlines are - in the full view of the public, Congress and the media - formulating an oligopoly with control of about 50 percent of the air traffic in the United States, and no one seems to be raising an eyebrow.

Even worse, American and United are agreeing to split the Boston-New York-Washington DC shuttle system in half "in the interest of competition." What competition?

I would normally be assured that the Department of Transportation (DOT) would never allow such a merger to go through compounded by what amounts to state-sponsored collusion.

My faith in the government has been shattered. Facts, unfortunately, only make the hope of government oversight seem more futile.

The outgoing DOT gang claims that they "moderated" much of the airline shenanigans by putting the public spotlight on "egregious" airline behavior.

Amazingly, DOT did not put out any "guidelines" for airline competitive behavior. DOT studies have shown that the airlines "signaled" to each other regarding fare changes and other programs in order to drive competitors out of the market and concluded that "predatory practices ... are a recurring possibility."

DOT studies have also shown that in hubs dominated by a single carrier, passengers pay an average of 41 percent more than passengers flying out of hub markets with low-fare competition. The differences are more startling for short-haul flights.

DOT studies show that where there is a strong low-fare airline such as Southwest and in some cases, AirTran Airway, fare reductions were dramatic. Other studies showed that the main factor in controlling fare increases was the significant presence of a low-fare airline. Though the major airlines claim that they have higher prices at their hubs because of service, mix of passengers, landing slots and higher operating costs, the DOT concluded that the higher fares only apply if there is no price competition.

Statistics, common sense, the passenger experience and official DOT studies all say the same thing. Major airlines where they have market power with no countervailing price competition act like thugs and gouge their passengers whenever possible.

But even with their own researchers telling them the present system is commercially corrupt and with the monthly statistics clearly showing a problem, DOT took the hear-no-evil and see-no-evil stance and elected to do nothing.

American/TWA, United/USAirways and the co-branded shuttle programs will only serve to further concentrate market power with the largest airlines and enhance their self-serving efforts.

Read the writing on the wall in the DOT studies. Don't let them do it.

Charlie Leocha is the Boston-based author of Travel Rights: Know the Rules of the Road and the Air Before You Go. Cheap Charlie appears every Monday on this site. E-mail him at leocha@aol.com or access his Web site.