|American Airlines' Tactics Alleged To Be Un-American|
|Topic||Government and the Economy|
|Key Words||Antitrust, Predatory Pricing, Competition, Fares, Government, Short Run, Monopoly, Losses|
The Federal Government is bringing an antitrust case against American Airlines alleging that the airline engaged in predatory pricing to thwart competition at the Dallas-Fort Worth airport. This coincides with growing consumer complaints about fares and service and congressional discussion about measures to disclose more information about fares and delays and to compensate travelers for inconveniences.
The government believes that American reduced its fares below cost, and added new flights, losing money in the short run. By forcing low-cost competitors out of the market, American was able to restore its monopoly position at the airport and to recoup its losses many times over. For example, on the Dallas-Wichita route, before the competition American charged $110 on average one-way, and carried 4465 passengers on average per month. When it competed with the low-cost carrier Vanguard, it lowered the fare to $57 and carried 11,246 passengers per month. Two months later, Vanguard abandoned its plans to expand, and American increased its fare to $96 and reduced the number of passengers to 8,540.
The airline responds that it should not be found guilty since it was only trying to match fares.
(Updated July 1, 1999)
|Source||Stephen Labaton with Laurence Zuckerman, "Airline Is Accused Of Illegal Pricing," New York Times, May 14, 1999.|
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