Southwest Airlines said it will pay $15 million to settle a series of class action lawsuits, which allege that the four biggest airlines in the U.S. entered into a conspiracy to drive up prices by artificially limiting capacity.
The Dallas-based carrier, however, admitted no wrongdoing and said it agreed to the settlement for practical reasons — since it would be facing significant legal fees whatever the ultimate outcome.
“We’re entering into this settlement to avoid considerable distraction and expense of protracted class-action litigation," Southwest said in a statement. And in rejecting the charges, the carrier pointed to its long record as a low-fare maverick.
“For decades, we have consistently set our capacity planning with a goal of offering our lowest fares to the hundreds of millions of customers of America’s largest and original low fare airline.”
The other airlines named in the suit — American, Delta and United – said they would continue to defend themselves against the charges. American, for one, said the accusations “are without merit.”
The lawsuits, which were filed in 2015 and more recently consolidated into a single case overseen by a federal court in Washington, grew out of a populist backlash in the period immediately following a wave of consolidation, which culminated in American’s agreement to merge with US Airways in 2013. The integration of the two companies was completed in 2015, creating what is by some measures the world’s largest carrier.
Around that time, congressional committees also began looking into the impact of airline consolidation — which, among other things, has meant that just four mega-carriers control more than 80 percent of all air traffic in the U.S.
That prompted the Justice Department to launch a probe into the possibility that airlines were using their increased market share to stifle competition. DOJ said it would look into charges that these giant airlines were somehow signaling each other on pricing, and that they were holding down capacity in certain markets to give themselves more leverage to raise prices.
The DOJ never took any action against the airlines, however, and it has since declined even to confirm that such an investigation took place, although airline sources have confirmed that they received requests for documents and related information.
Airlines are expected to continue to argue that air fares have not risen unreasonably and point to data from the government showing that average air fares have, if anything, declined somewhat in the past year.
A hearing before the federal judge overseeing the case, Judge Colleen Kollar-Kotelly, has been scheduled for Feb. 12, at which point the status of the case may become clearer.