U.S. probing possible price-gouging by airlines after rail crash

[July 25, 2015]  By Richard Cowan and Jeffrey Dastin
 
 WASHINGTON/NEW YORK (Reuters) - The U.S. Transportation Department is investigating possible price gouging by the five biggest U.S. airlines while train service was disabled between New York and Washington following a deadly Amtrak crash in May, it said on Friday.

The regulator sent letters on Friday asking each carrier to detail average fares along the route before, during and after the crash. It demanded an explanation for price increases, if any, and asked the airlines whether they communicated with each other about those fares, which might signal collusion.

The review involves Delta Air Lines Inc <DAL.N>, American Airlines Group Inc <AAL.O>, United Continental Holdings Inc <UAL.N>, Southwest Airlines Co <LUV.N> and JetBlue Airways Corp <JBLU.O>, all of which said they were cooperating with the probe.

American and United added they were confident that no wrongdoing would be found, while Delta said it did not increase prices but instead lowered some of its highest fares by nearly 50 percent following the crash.
 

"These airlines have allegedly raised fees beyond what you would ordinarily expect in the Northeast Corridor at a time when the Amtrak line was shut down," Transportation Secretary Anthony Foxx told reporters on Friday.

The probe comes at a difficult time for U.S. airlines, already the subject of a Justice Department investigation into whether they worked together illegally to keep fares high by signaling plans to limit flights.

Consumers are also showing signs of dissatisfaction after carriers recently squeezed more seats onto planes and added new ancillary fees, increasing the cost of air travel.

The new probe will have to account for ticket prices being a computer-automated response to demand, industry consultant Robert Mann said. Reservation systems displayed high fares simply because all the cheaper ones had been purchased.

"You had a runaway bookings situation because of the unfortunate incident," Mann said.

Delta and American said they added seats to accommodate more passengers, and Delta allowed previously ticketed Amtrak customers fly for free.

Eight people were killed and more than 200 injured in the Amtrak derailment in Philadelphia. Amtrak traffic between Washington and New York City was shut down for six days as a result.

Foxx said the investigation comes after Connecticut Senator Chris Murphy contacted the Obama administration with concerns over consumer protection.

The Transportation Department has authority to stop any illegal practice by the airlines, according to Foxx, although it was not immediately clear what punishment could result from the investigation.

(Reporting by Richard Cowan in Washington and Jeffrey Dastin in New York; Editing by Bill Trott, Doina Chiacu and Bill Rigby)

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