Improving 'awful' isn't airline collusion: Experts

Improving 'awful' isn't airline collusion: Experts

The Justice Department announced Wednesday that it is investigating whether or not airlines colluded to artificially inflate airfares , but industry experts are questioning what evidence they might have.

"For the first time in history we've had air fares rising in real terms on a consistent basis," Airline Weekly Managing Partner, Seth Kaplan told CNBC's "Power Lunch." Looking solely at that fact might lead some to be suspicious of collusion, but to Kaplan, "airlines are still not putting up profit margins that would make most industries jealous, they are only dong well by their own awful standards."

But after airlines that couldn't surpass those awful standards ceased operations, just four major operators remain. Delta (NYSE: DAL), Southwest (NYSE: LUV), American (NASDAQ: AAL), and United (NYSE: UAL)now control more than 80 percent of the seats in U.S. skies. Enough smoke, some say, to suspect fire.

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However, Kaplan points out that's not necessarily all bad news for passengers. "It's good even as a consumer to not be buying tickets from airlines that we don't even know [for sure] are going to be in business by the time they fly anymore," he said.

For former Continental Airlines CEO Gordon Bethune, it's nothing more than a case of mistaken identities.

"[Airline executives] are smart people, and the smart people usually come up with the same correct answer," he said. "That't not collusion that's just coming up with the same answer."

Bethune also defended the competitiveness of the major four airlines, claiming all of them go head-to-head in nearly every market in the country.

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"They are not trying to buy market share," he said. "You can't do it because your competitor is just going to match it, and you'll both lose money." Both, however, conceded the Justice Department's case would be a different story if evidence could be provided that showed the airlines actively agreed to constrain capacity.



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