As the US Justice Department probes possible “unlawful coordination” by America’s major airlines, attention is focussing on a few vivid historic instances of airline executives indulging in “nod and wink” discussions about fares – and sometimes more than that.
It’s not known what triggered the latest US probe, but senior US airline chiefs have been openly discussing concepts such as the advantages of “capacity discipline”, which may have sent up a red flag for investigators.
In the current case, the four largest US airlines – American, Delta, Southwest and United Continental – are cooperating with the investigation. Government investigators want details of conversations, meetings and emails. They want to find whether airlines have discussed ways of controlling overall capacity, which plays a big part in setting fares.
In an examination of the issue, two reporters from Bloomberg cited Dan Reed’s book ‘An American Eagle’, published in 1993, which detailed a conversation in 1982 between Robert Crandall of American Airlines and Braniff Airlines’ chief executive Howard Putnam.
Putnam secretly recorded Crandall saying: “I have a suggestion for you. Raise your goddamn fares 20%. I’ll raise mine the next morning.”
Crandall added: “You’ll make more money, and I will, too.”
What more do you need? But the outcome of that was pretty tame. Crandall agreed with the Department of Justice not to repeat such behaviour. He was ordered to record all contacts with other airline executives for two years.
Braniff went bankrupt and Crandall went on to become the most famous chief executive American has ever had.
Collusion cases are notoriously hard to prove. Meetings in Sydney between senior airline executives happen frequently and in decades past, some have been investigated. But who’s to know when a nod or a wink takes place?
Written by Peter Needham