Southwest, American agree to pay $60M in price-fixing lawsuit
An ongoing nationwide litigation by passengers who claim that the four largest U.S. carriers – American Airlines (A1G) (AAL) , Delta, Southwest, and United (the “Defendants”), conspired along with US Airways and Continental Airlines to increase fares by limiting capacity on domestic flights, has reached a turning point. Southwest and American Airlines (A1G) (AAL) (the “Settling Defendants”) have agreed to pay a total sum of $60 million to settle the litigation.
“If you bought a domestic airline ticket on American, Delta, Southwest, United, Continental, or US Airways between July 1, 2011 and June 14, 2018 your rights could be affected,” opens the official website for the Domestic Airline Travel Antitrust Litigation Settlements.
According to the website, a class action lawsuit has been filed against the four largest U.S. carriers, claiming the Defendants agreed to limit capacity on domestic flights. The lawsuit alleges that ticket purchasers may have paid artificially inflated prices as a result.
The affected include persons and entities who purchased tickets “for flights within the U.S. and its territories and the District of Columbia from American Airlines (A1G) (AAL) , Delta, Southwest, United, Continental, or US Airways at any time between July 1, 2011, and December 20, 2017, for the Southwest settlement and between July 1, 2011, and June 14, 2018, for the American Airlines (A1G) (AAL) settlement”.
As of October 19, 2018, two settlements have been reached: Southwest has agreed to pay $15 million and American Airlines (A1G) (AAL) has agreed to pay $45 million, settlement documents indicate. The Settling Defendants also agreed to provide certain cooperation against the remaining carriers in the ongoing litigation (the "Non-Settling Defendants"). Both Southwest and American deny that they did anything wrong and have asserted defenses to the Plaintiffs’ claims.
Asked to confirm the news, American Airlines (A1G) (AAL) replied: “American has settled a lawsuit that claimed passengers were harmed by an alleged agreement among airlines to restrict domestic capacity growth. The settlement does not include any admission of wrongdoing, and we continue to deny, without qualification, that American participated in any such agreement,” the company’s October 23, 2018, email to AeroTime reads.
According to American, the “facts” are that the carrier dramatically increased domestic capacity during the period in question, while also taking delivery of hundreds of new aircraft. The airline stated that investments made in its network were beneficial to customers, as reflected in the increase of domestic passenger traffic, which actually led to fares dropping to “near all-time lows”.
The carrier identifies the cost of the litigation as the key reason behind its decision to settle, maintaining that it is up to each individual airline company to decide when and where to add routes or flights. “Despite our firm conviction in the appropriateness of our actions, costs to defend against antitrust litigation often run into the tens of millions of dollars. So while it is difficult to agree to a settlement when we believe we’re right on the law and the facts, settling this case is a prudent decision for American,” the company stated.
Southwest confirmed it had agreed to settle at a payment of $15 million, pointing to the “substantial burden and distraction” an antitrust class action such as this would impose on the company in the long term. “Southwest was confident that it would have ultimately prevailed in this litigation,” spokeswoman for Southwest, Michelle Agnew, said in an October 24, 2018, letter. However, “after careful consideration of the considerable expense and inconvenience that would have been entailed in this continued litigation,” the company decided to enter into settlement.
Could the situation get worse?
The lawsuit goes several years back when on October 13, 2015, the United States Judicial Panel on Multidistrict Litigation consolidated 23 actions pending in seven districts and handed over the consolidated class action to the court of the District of Columbia. Case documents show that the Defendants moved to dismiss the consolidated complaint, but the motion was denied in October 2016. At that time, the total number of cases consolidated in this class action rose to 105.
According to information released by Keller Rohrback LLP, the current case status is that litigation is “proceeding to discovery, including discovery of both defendants and many third parties”. Discovery will continue into 2019, the law office states.
The Antitrust Litigation website informs that the settlements reached with Southwest and American do not impact claims in the lawsuit against the Non-Settling Defendants – Delta and United. The lawsuit, claiming the remaining carriers fixed prices for domestic airline tickets by keeping capacity artificially low, is ongoing against them. Spokeswoman for United, Erin Benson Scharra, told AeroTime: “We will continue to defend ourselves against these claims, which we have always maintained are without merit.”
It seems American and Southwest have played it safe, while remaining completely defiant. Let us see if United and Delta will be the next to give in (and if so, at what price). As for the other two carriers mentioned in the claims, both had merged with their parent companies years ago: US Airways merged with American Airlines (A1G) (AAL) back in 2015 and the two now operate under a single certificate; Continental Airlines was brought under United’s wings in a 2012 merger.
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