US probing possible price-gouging by airlines after rail crash

25 Jul 2015 | Author: | No comments yet »

5 Major Airlines Investigated For Price Gouging During Amtrak 188 Derailment.

BALTIMORE (WJZ)–The government has opened an investigation into five major airlines following allegations involving price gouging during the deadly Amtrak derailment in May. WASHINGTON —The Obama administration has launched a formal investigation into possible price gouging by five U.S. airlines, including American Airlines and Southwest Airlines, in the days immediately after a fatal Amtrak crash in May temporarily idled routes along the Northeast rail corridor.Five airlines are being investigated by the US Department of Transportation for price gouging desperate rail commuters after the deadly derailment of an Amtrak train in the Northeast Corridor on May 12. PHILADELPHIA, PA – MAY 13: Investigators and first responders work near the wreckage of Amtrak Northeast Regional Train 188, from Washington to New York, that derailed yesterday May 13, 2015 in north Philadelphia, Pennsylvania. The Transportation Department sent letters on Friday to Delta, American, United, Southwest and JetBlue airlines seeking information on their prices before and after the May 12 train crash.

Transportation Department is investigating five of the nation’s largest airlines for potential price gouging in the aftermath of May’s deadly Amtrak crash, the agency said Friday. The department asked airlines for price information on flights to certain Northeast destinations from Dulles International Airport and Reagan National Airport near Washington; Baltimore-Washington International Airport; Philadelphia International Airport; three New York area airports — Newark, John F. Kennedy, and LaGuardia; Logan International Airport in Boston; MacArthur Airport-Long Island in New York; Green Airport in Rhode Island; and Bradley International Airport in Connecticut. “The idea that any business would seek to take advantage of stranded rail passengers in the wake of such a tragic event is unacceptable,” Foxx said.

For example, the DOT wants a spreadsheet of the average fare by market, day, and fare class for flights on routes in the corridor from April 28th to May 26th. Those were the days that service was interrupted on Amtrak’s busy Northeast Corridor after train derailed. “I think that the airlines are always trying to get as much as they can for a seat, and in this case I think they maybe went too far,” Hobica said. The department is exploring whether the price hikes violated federal regulations prohibiting airlines from engaging in unfair and deceptive practices.

Delta, the airline accused that $2,300 fare says it “Did not increase air fares following the crash” adding it lowered prices, honored existing Amtrak tickets and increased seat capacity. The letters to airlines explain that generally a practice is “unfair” if it “causes or is likely to cause substantial injury to consumers,” cannot be reasonably avoided by consumers and “is not outweighed by countervailing benefits to consumer or competition.” The investigation was prompted in part by a May 19 letter from Sen. Since word of the DOJ inquiry became public July 1, attorneys have filed at least 49 lawsuits in 12 federal district courts accusing American, United, Delta and Southwest of antitrust violations, including four cases filed in U.S.

Christopher Murphy, D-Conn., who complained to the Obama administration that some airlines had increased fares to as high as $2,300 following the train crash. “I was glad to see that after their $2,300 flight raised eyebrows, Delta Air Lines announced that it would make every effort to accommodate passengers affected by the service outage along Amtrak’s lines in the Northeast,” he said. The airline also said in a statement that it lowered its highest shuttle prices after the crash “by nearly 50 percent, to about $300 each way,” for travel between New York, Boston and Washington. A quick look at fares, he said, suggests something might be amiss. “Our review shows that following the accident, there were higher prices in that corridor than you would normally expect, and our investigation is into whether there were unfair practices involved in setting prices at that time,” he said.“We have sufficient information to be concerned.

He said it may be common for fares to jump when demand for air travel increases, following the shutdown of a rail corridor. “But the question is, was this beyond the pale? Separately, the Justice Department announced earlier this month that it is investigating possible collusion among major airlines nationwide to limit available seats, which keeps airfares high. For reasons still unknown, the train accelerated to 106 miles per hour in the minute before it entered a curve where the speed limit is 50, investigators have said previously.

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