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Why Aren't U.S. Airlines Not Treated As Cartels?  
User currently offlineBobcat From United States of America, joined Jun 2007, 0 posts, RR: 0
Posted (11 years 7 months 2 weeks 2 days 3 hours ago) and read 2298 times:

Why aren't U.S. airlines not treated as cartels?  Smile

9 replies: All unread, jump to last
 
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 1, posted (11 years 7 months 2 weeks 2 days 2 hours ago) and read 2277 times:

They are not cartels in the true sense of the word. They are prohibited from entering into the requisite agreements that form the basis of a cartel. For instance, OPEC ministers sit around the table and fix output. That is a cartel agreement. The Sherman Act prohibits such conduct in the US. Airlines are more of a collusive oligopoly and have some cartel-like features. Fare actions, rule changes, and so on are, as you know, initiated by one carrier and the rest follow in unison on many occasions. Although there is no actual agreement, they behave as if there actually were an agreement.

Of there is limited antitrust immunity for international alliances but that is the exception and not the rule.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4467 posts, RR: 34
Reply 2, posted (11 years 7 months 2 weeks 2 days 1 hour ago) and read 2256 times:

The six network carriers in the US (AA/ UA/ DL/ NW/ CO/ US) function as a cartel, but aren't one on paper (except at Orbitz). They adopted the cartel economic strategy around 1992. Their terrible Gulf War-era financial losses convinced them that it wasn't worth going after each others' market share with low fares. All that did was hurt everyone's yields. People Express was gone, the merger mania of the late '80s had settled out to six major carriers, and all six had high fixed costs.

So it made more sense to limit capacity, hike fares, and compete *only* for the high-fare business travelers with bigger and better clubs, and FF perks. Leisure folks were screwed, except in the fortunate cities that had Southwest. That's a cartel strategy, even if there was no on-paper collusion. There didn't need to be any. Common economic interest--unions and management/ shareholders had the same interest--dictated the "let's all agree to leave each other alone except on high-fare buisness pax" strategy. Which was *not* the interest of paying passengers.

The Department of Justice has alternately treated the Six Families as individual businesses, and as a cartel. DOJ rejected UA-US last year at least partially because it would have certainly led to industry consolidation.

Orbitz is most definitely a cartel creature--five of the Six families get together to distribute their lowest seat-dumping leisure fares at one site. Why DOJ hasn't shut down that anticompetitive beast, I don't know. It's *entirely*--read *entirely*--intended to destroy low-fare competition. What could better fit the dictionary definition of collusion, I don't know. The entire idea is to market the Cartel as a big source of low fares. Yeah, right. If Southwest weren't around we'd all pay through the nose, and Orbitz would mysteriously evaporate.

Jim


User currently offlinePadcrasher From , joined Dec 1969, posts, RR:
Reply 3, posted (11 years 7 months 2 weeks 2 days ago) and read 2221 times:

Because there is no cartel in the airline industry.

Price competition is there. High cost carriers suffer. Low cost carriers make money. Consumers in 95% of the markets have multiple carriers to choose from. Cartels defy market forces. This is definitely not the case in the airline industry. The market is able to punish and reward. New entrants are coming in, old airlines are going out.

Sorry Jim but the DOJ and Supreme Court disagree with you. No Orbitz case, no driving little guys from the market, no price collusion. Just business and business is tough.


User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 4, posted (11 years 7 months 2 weeks 2 days ago) and read 2212 times:

Jim actually makes a good point about Orbitz. The Supreme Court has not looked at Orbitz so we don't know what they think about Orbitz.

Orbitz has some features that are troubling. Member airlines are required to post their lowest fares on Orbitz. In other words, they absolutely cannot put up a cheaper fare anywhere else including their own websites. This eliminates a type of price competiton between them.


User currently offlinePilot1113 From United States of America, joined Aug 1999, 2333 posts, RR: 12
Reply 5, posted (11 years 7 months 2 weeks 2 days ago) and read 2191 times:

>>Orbitz has some features that are troubling. Member airlines are required to post their lowest fares on Orbitz. In other words, they absolutely cannot put up a cheaper fare anywhere else including their own websites. This eliminates a type of price competiton between them.

Which is why I refuse to use Orbitz. I am boycotting them in favor of Expedia and other travel sites.

Yes, the major airlines are a cartel... athough to blatently act like one would be grossly illegal. When one carrier announces that they're going to hike a fare, they'll usually do it on a weekend and wait to see what the other carriers do. If the others don't go along, then this carrier will lower their fares back down come Monday. This, in my opinion, is just barely crossing the line into anti-trust.

- Neil Harrison


User currently offlinePadcrasher From , joined Dec 1969, posts, RR:
Reply 6, posted (11 years 7 months 2 weeks 1 day 23 hours ago) and read 2176 times:

The DOJ looked into Orbitz and so no evidence of wrong doing..maybe they're in on the Cartel's little scheme as well?

User currently offlineLMP737 From , joined Dec 1969, posts, RR:
Reply 7, posted (11 years 7 months 2 weeks 1 day 23 hours ago) and read 2177 times:

Pilot1113:

That's funny, I refuse to use Expedia. I was hit with a $25 charge when I cancelled hotel reservations two weeks ahead of time. Several months ago I did the same on Orbitz and I did not get charged.

P.S. Looking at your profile I suspect that you wouldn't mind working for one of those "cartels". Am I wrong?


User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 8, posted (11 years 7 months 2 weeks 1 day 22 hours ago) and read 2123 times:

There is a huge difference between actually having a cartel agreement and simply behaving as if you had one (like the airlines do). Making an agreement will cost you triple damages and quite possibly jail time. In contrast, simultaneous fare and rule actions without an agreement is legal.

User currently offlineManiac From United States of America, joined Apr 2001, 111 posts, RR: 0
Reply 9, posted (11 years 7 months 2 weeks 1 day 22 hours ago) and read 2098 times:

The US majors are not a cartel. You are confusing a cartel with an oligopoly.


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