"Yield management" can help airlines turn tragedy into profits.
Transportation Secretary Anthony Foxx said Friday the government has opened a price-gouging investigation involving five airlines that allegedly raised airfares in the Northeast after a deadly Amtrak crash in Philadelphia in May disrupted rail service.
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.
Among the routes the department asked airlines for price information on were 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.
The department is exploring whether the price hikes violated federal regulations prohibiting airlines from engaging in unfair and deceptive practices. 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. 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.
However, he also noted that some airlines “self-corrected after I initially expressed concern.”
“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. On Friday, Delta was charging $428 for a same-day, one-way fare from LaGuardia to Reagan National.
Delta said in a statement that it lowered its highest shuttle prices after the train crash “by nearly 50 percent, to about $300 each way,” for travel between New York, Boston and Washington. The airline said it also honored existing tickets for travel between Washington, Boston and New York, waived change fees for travel on Delta Shuttle flights between those markets, and increased seat capacity in the region by adding flights and operating larger aircraft.
American said it added capacity and its fare structure remained the same after the crash. United, JetBlue and Southwest said they are cooperating with the investigation.
Amtrak services between Philadelphia and New York were shut down for five days following the accident. That affected passengers traveling through that region. For example, passengers couldn’t travel from Washington to Boston or New York, or from Boston to Philadelphia or Baltimore. Full service resumed on May 18.
Amtrak service accounted for 78 percent of the air-rail market between New York and Washington and 69 percent between New York and Boston last year, according to the railroad.
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. The civil antitrust investigation by the Justice Department appears to focus on whether airlines illegally signaled to each other how quickly they would add new flights, routes and extra seats. American, Delta, Southwest and United — the nation’s four largest airlines — have acknowledged receiving letters from the Justice Department related to that investigation.
Eight people were killed and about 200 were injured in the Amtrak crash in Philadelphia, temporarily disrupting service.
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. In the last few seconds the brakes were applied with maximum force, but the train was still traveling at over 100 mph when it left the tracks.
Associated Press writers David Koenig in Dallas and Scott Mayerowitz in New York contributed to this report.
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Photo Credit: Transportation Secretary Anthony Foxx is shown during testimony before the Senate Transportation subcommittee on Capitol Hill in Washington. J. Scott Applewhite / Associated Press
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