The US Justice Department’s Antitrust Division and the Department of Transportation (DOT) have taken a significant step towards ensuring fair competition in the airline industry. On Thursday, they announced the launch of a broad public inquiry into the state of competition in air travel, encompassing a wide range of issues.
The inquiry aims to delve into various aspects of the industry, including past airline mergers, aircraft manufacturing, ticket sales practices, pricing strategies, and loyalty program operations. The agencies have issued a Request for Information (RFI) seeking public input on potential anticompetitive conduct, consolidation trends, and factors impacting the availability and affordability of air travel options.
Assistant Attorney General Jonathan Kanter emphasized the crucial role of competition in air travel, stating, “Competition in air travel is a vehicle for better quality, better fares and better choices for Americans.” He expressed hope that the inquiry would provide valuable insights from businesses and travelers, allowing the Justice Department to build upon its ongoing efforts to protect competition in this vital sector.
The U.S. Travel Association, however, voiced its concerns about the inquiry, viewing it as a politically motivated move. The organization expressed disappointment in the announcement, seeing it as part of a larger trend of political interventions in the airline industry.
This latest inquiry comes at a time of heightened scrutiny on airline mergers and consolidation. The Biden administration has actively sought to curb industry concentration, and the Justice Department recently successfully blocked the proposed merger of JetBlue Airways and Spirit Airlines. This decision has had a significant impact on both airlines, with Spirit Airlines facing financial difficulties and potentially heading towards bankruptcy. The airline has since resumed preliminary merger discussions with Frontier Group Holdings, a move that could be influenced by the outcomes of the DOJ’s inquiry.
Furthermore, the DOT has initiated an investigation into the loyalty programs of the four largest US airlines, namely American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines. Transportation Secretary Pete Buttigieg has requested information from these airlines regarding their loyalty program practices and policies, seeking to determine if any unfair, deceptive, or noncompetitive practices are in place.
While the DOJ and DOT have taken a stance against consolidation, they did approve the merger of Hawaiian Holdings and Alaska Air Group in September, albeit under specific consumer protection requirements. The inquiry announced this week could impact other industry players, including aircraft manufacturer Boeing and parts supplier Spirit Aerosystems Holdings. Investors can monitor the industry’s response through airline-focused ETFs such as the U.S. Global Jets ETF and the iShares U.S. Transportation ETF.
The outcome of this inquiry will likely shape the future of competition in the airline industry, impacting everything from airfares and flight options to the broader landscape of airline mergers and consolidation. The public’s participation in providing information will be critical in informing the Justice Department and DOT as they navigate these crucial issues.
