American to Pay $45 Million to End Airfare Collusion Suit
(Bloomberg) -- American Airlines Group Inc. agreed to pay $45 million to end a consumer antitrust lawsuit that accused it and three other major U.S. airlines of colluding to limit plane capacity and drive up domestic airfares.
The Fort Worth, Texas-based carrier is the second to settle in the three-year-old litigation. Southwest Airlines Co. won preliminary court approval for its offer to pay $15 million and cooperate in the case in January. American, too, has pledged its cooperation as the litigation continues against United Continental Holdings Inc. and Delta Air Lines Inc.
The four airlines’ fares rose substantially even though demand was stagnant and the price of jet fuel, one of the largest costs for airlines, was declining, according to the consumers. Executives for those companies are accused of assuring one another that they’d adhere to "capacity discipline" and of carrying out their scheme by limiting consumer ability to compare prices and deter market entry by foreign rivals.
American spokesman Matt Miller said the airline denies the allegations and, in settling, admitted no wrongdoing.
American “dramatically increased” domestic capacity during the period covered by the claims, Miller said. As passenger traffic has increased, fares have fallen to near all-time lows in an “intensely competitive” U.S. airline industry, he said.
“Despite our firm conviction in the appropriateness of our actions, costs to defend against antitrust litigation often run into the tens of millions of dollars,” Miller said. “So while it is difficult to agree to a settlement when we believe we were right on the law and the facts, settling this case is a prudent decision for American.”
BI Litigation Primer: Southwest Airlines
The non-governmental consumer antitrust cases were first lodged against the airlines in federal courts around the U.S. in 2015. Later that year, they were consolidated for pretrial proceedings before U.S. District Judge Colleen Kollar-Kotelly in Washington, with a unified complaint being filed in March 2016.
As part of the accord, American agreed to produce business records and make as many as three current or former employees available to answer questions under oath about its documents and transactional data. The deal must be approved by a judge. A final approval is still pending for the Southwest accord.
Southwest said it settled to avoid the “considerable distraction and expense” of prolonged litigation even though it was confident it could win. The Dallas-based discounter denied entering into any unlawful agreements with other carriers.
“We will continue to defend ourselves against these claims which we have always maintained are without merit," a United Airlines spokesperson said in an email.
Delta said in a statement Friday that it didn’t engage in any illegal behavior.
“The assertion that our success is due to anything but the hard work of our people is offensive,” Delta spokesman Morgan Durrant said.
The case is In re Domestic Airline Travel Antitrust Litigation, 15-mc-1404, U.S. District Court, District of Columbia (Washington).
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