New Guideline Designed to Eliminate Unfair Competition
WASHINGTON (Bloomberg) -- Major U.S. airlines could be fined as much as $1,100 a day per violation for adding seat capacity and lowering fares with the intention of driving smaller carriers out of markets where they compete, the U.S. Department of Transportation said Monday.
Several airlines, including UAL's United Airlines and Northwest Airlines, have been accused of hard-ball competitive tactics to drive new entrants such as Frontier Airlines and Spirit Airlines out of some markets. The major carriers respond that matching discount- carrier fares is a legitimate business strategy.
"Consumers deserve a pro-competitive standard that helps ensure affordable air fares and accessible service," Transportation Secretary Rodney Slater said as he announced new guidelines for airline competition. "We must preserve vigorous competition and prohibit unfair exclusionary practices meant solely to eliminate that competition." Large airlines had warned the DOT against moving ahead with the competition policy, arguing that it threatens to undo the 1978 airline deregulation act. "This will have a chilling effect on how we compete," said Chris Chiames, a spokesman for AMR's American Airlines. DOT General Counsel Nancy McFadden said that under federal statute, the DOT may penalize carriers $1,100 a day per violation. It's unclear whether the airlines would be fined per flight, per route, or per passenger. Slater said the size of the fines ultimately "will depend on the severity of the actions." Under the guidelines, a major carrier could be penalized for unfair practices if it slashes fares or adds new capacity that causes it to lose more revenue than the new carrier could have siphoned off. …