More on Signaling and Anti-Trust

Several months ago I wrote that airlines used “fuel surcharges” rather than price increases as a way of signaling, announcing their intentions to change fares in an attempt to coordinate pricing with other carriers. They need to utilize these smoke signals so as not to run afoul of anti-trust laws.

Or so they hope.

American has settled a Justice Department probe, agreeing to a $3 million fine for violating

    terms of the 1994 decree by publishing certain fares with increased advance purchase requirements only for future travel dates, rather than current travel. This effectively reduced American’s risk of losing passengers to other airlines.

American was publicly announcing future price changes which didn’t affect current bookings, and waited to see whether other carriers matched. If other airlines didn’t make similar changes, they could rescind their price changes without their having gone into effect.

Clever. But the Justice Department argued that American agreed not to do this when they entered into a consent decree (along with several other airlines and the Air Tariff Publishing Corporation) in 1994.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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