Monday, March 7, 2011

Air Fares, Price Fixing and Justice

On March 6, 2011 AP reported that 21 non-US airlines were fined some $1.7 billion for fixing passenger and cargo fees. Several executives have been charged with four having been sentenced to prison. The cases were brought by the US Department of Justice.

I have always wondered about this. Everyone knows that gas stations peg their prices to what nearby gas stations are charging. To me, that smacks of price fixing too. But how do airlines get away with their fare policies? Today [March 7, 2011 at 9:30 a.m. EST] I went to the Orbitz website to book a trip From LaGuardia, NY to Chicago. Here is what I found.

How can it be that multiple airlines have the exact same fares? And it is not just Orbitz. If you go to the carrier’s websites, the $176.00 fare appears on all of them.

What is interesting is that I have always been told that if a surgeon discusses his fee structure with another surgeon, we would both be guilty of anti-trust violations. But somehow, the airlines can all just happen to have the same fares for their routes and no one says anything.

I wish someone would explain this to me.

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