AX149_2756_9.JPG
United Airlines jetliners are parked at Newark Liberty International Airport as the sun rises behind the New York City skyline.
(AP file photo)
A record 222 million passengers are expected to travel on U.S. airlines this summer. It's the reason the industry that has been often troubled in the past is now flying high.
Since the start of 2013, U.S. air carriers have earned nearly $25 billion, a soaring financial turnaround that follows a $33-billion loss during the previous decade.
That's partly because, much to the disgruntlement of passengers, the airlines have been cashing in lately on new sources of revenue. Travelers forked over $3.6 billion in bag fees during the past 12 months and $3 billion in reservation-change fees.
Even higher profits might be in store this year thanks to a massive drop in the price of jet fuel, the airlines' single highest expense. In April, U.S. carriers paid just $1.94 a gallon, down 34 percent from the year before.
But clouds loom on the horizon. The federal government is investigating possible collusion among the major airlines to limit available seats, which could have been part of a concerted effort to keep ticket prices from declining.
Federal investigation
A civil antitrust probe by the Justice Department appears to focus on whether airlines illegally communicated with to each other about how quickly they would add new flights, routes and extra seats.
On behalf of harried travelers, the feds are rightly trying to make sure that nothing conniving or improper is going on.
Fliers already face more than enough headaches, including all the security restrictions and delays of the post-9/11 era.
For quite a different reason, Washington ought to remain wary about how the big airlines do business.
Thanks to a series of mergers starting in 2008, American Airlines, Delta Air Lines, United Airlines and Southwest Airlines now control more than 80 percent of the seats in the domestic air travel market.
They have eliminated unprofitable flights, filled more spaces on the jetliners they deploy and made what appears to be an effort to slow their growth to prop up airfares.
The average domestic ticket price rose an inflation-adjusted 13 percent from 2009 to 2014, according to the Bureau of Transportation Statistics. It is now $391.
There are various ways to analyze the industry's current financial situation -- inflation-adjusted fares are still down 16.3 percent from their peak in 2000, for example.
But what comes next is uncertain.
Early last month in Miami, at the International Air Transport Association (IATA) annual meeting, the airlines publicly discussed seating capacity on flights.
Fares kept artificially high?
It led Connecticut Democratic Sen. Richard Blumenthal to ask the Justice Department to determine whether airlines colluded to limit the seats available in order to keep prices high and planes full.
The big carriers have been reducing the number of available seats even though demand for flights has been rising.
Mr. Blumenthal told National Public Radio: "They talked about discipline, which is kind of a fancy word for constraining the number of flights and what's known as capacity in the industry. It's kind of Economics 101 -- supply and demand. If you reduce the supply, you can charge more because the demand is seeking a smaller number of flights."
To be fair, the airline industry must juggle the balance between the public interest, national interest and its own need to profit from commercial operations. Every flight costs a lot of money and if there are a lot of empty seats, the airline loses. Ideally, passengers, ranging from occasional travelers to constant business fliers to happily retired tourists, would decide among airlines based on the choice of flights, low prices and quality of service.
Competition lacking
The necessary basis for this is competition.
"It's hard to call a market where just four companies control more than 80 percent of business competitive, but that's where the continued consolidation in the airline industry has left travelers," said William J. McGee, airline and travel consultant to Consumers Union, the advocacy and policy branch of the non-profit organization Consumer Reports.
He added, "Airline collusion to keep already high prices artificially inflated would be an even more egregious offense and we're glad the Department of Justice is taking a hard look with this investigation."
The situation isn't exactly unprecedented.
In 1993, U.S. airlines settled a $396-million class-action lawsuit for allegedly colluding on fare increases. In 1994, they settled a Justice Department lawsuit on similar charges.
Later that year, eight major airlines agreed to pay $40 million in airfare discounts to settle a price-fixing lawsuit brought by the attorneys general of 10 states.
Today's worries may prove groundless.
But only Uncle Sam's vigilance can prevent the big airlines from flying out of control in search of big profits.