Sky Talk

American CEO says “there has been no illegal behavior”

Brandon Wade

American Airlines chief executive Doug Parker said the Fort Worth-based carrier has done nothing wrong in answering investor questions about capacity.

Several U.S. airlines, including American, are being investigated by the U.S. Department of Justice for collusion related to making capacity decisions to keep airfares high.

“On behalf of your entire leadership team, let me be crystal clear: there has been no illegal behavior on the part of American Airlines. We will comply fully with the demands of the CID and this fact will be proven,” Parker told employees in a letter sent on Saturday.

Parker added that he doesn’t know why the DOJ has decided to investigate the airline industry about capacity and finds it “perplexing” as airlines have been adding more capacity than there is demand for in the marketplace right now.

American was the focus of a previous DOJ investigation after it announced its merger with US Airways. The DOJ filed a lawsuit to stop the merger, saying it would harm consumers and raise fares, however, the suit was settled after the airlines agreed to give up takeoff and landing slots and gate leases at several airports.

“It is discouraging that less than two years later, with traffic and capacity up, and fares down, DOJ still doesn’t seem to acknowledge that the airline industry is as competitive a business as there is in the world,” Parker said.

Keep reading for the full message from Parker.

A Message from Doug Parker

American Airlines Team Members:

By now you have read that the Department of Justice (DOJ) has issued a Civil Investigative Demand (CID) to several airlines including American Airlines. This CID requests documents and other information so that DOJ can determine whether there may have been an illegal “agreement or coordination of air passenger service capacity” between some airlines.

We want to be sure you understand this is only an investigation and no allegations of wrongdoing have been made, much less conclusions that anyone violated the law. But we appreciate that the simple disclosure of an investigation may cause some team members to wonder if their airline has done something wrong. On behalf of your entire leadership team, let me be crystal clear: there has been no illegal behavior on the part of American Airlines. We will comply fully with the demands of the CID and this fact will be proven.

Some of you may be wondering why this is occurring now. The short answer is we don’t know. It appears the Department’s concerns may have been triggered by public comments attributed to airline executives, analysts, and investors about industry or individual airline capacity growth. We at American have definitely answered a number of questions from investors, analysts and the media over the years about capacity. But there is nothing illegal about that – indeed, transparency is rightly expected by all of our external stakeholders. The CID is even more perplexing given that US airline capacity has grown faster than demand of late. Capacity has been added in widely different amounts by our competitors, each seeking an advantage to benefit their customers, employees, and stockholders.

Whatever the rationale, it is clear we continue to struggle to get the US Justice Department to understand how intensely competitive our business is – how hard all of you work to ensure safe and reliable air travel for the American public, and how hard you fight to earn every customer from the competition. When we worked with the Justice Department to clear our merger, we learned they are good, smart, well-meaning people doing what they believe is required. But we also learned they harbored a number of unwarranted concerns about mergers and our industry, concerns we thought were since mitigated. For example, they were concerned American would shrink the combined capacity of AA/US post-merger (it has grown); they were concerned fares might increase (they have fallen); they were concerned American would cut jobs (we have added jobs in all work groups and increased wages materially); they were concerned American would terminate the US Airways “maverick” pricing philosophies (we have maintained and expanded them). Once we showed we were prepared to challenge DOJ’s assumptions in court, we were able to reach a resolution that created a better American and an even more competitive industry. So it is discouraging that less than two years later, with traffic and capacity up, and fares down, DOJ still doesn’t seem to acknowledge that the airline industry is as competitive a business as there is in the world. Our industry bears some responsibility for that disconnect, because we clearly haven’t made our case effectively enough. So the silver lining here is perhaps this investigation will help close the gap between DOJ perceptions of our industry and the competitive realities we face every day.

In closing, while we haven’t been formally accused of anything, some of you may think that the public disclosure of an investigation can create an inference that American has done something wrong – which feels like being wrongfully accused. And that is not fair to all of you. The majority of you are out in the operation over this holiday weekend taking care of our customers – ensuring they get safely home to their families or to a special destination for a well-deserved three-day vacation. With this CID in the news, you will unfortunately hear from some customers that your company and your industry are being investigated for behavior that is unfriendly to consumers. Or you may hear the same from your neighbors at a cookout. We’re sorry you have been placed in that position. It’s unfair and you don’t deserve it.

While this is an unfortunate situation, our request to all of you is to please ignore it. Go out and do the great job you do every day in the safe, professional and customer-friendly manner you always do. Working for a commercial airline is a noble profession – airline employees bring people together, allow businesses to run, reunite families and friends, and allow people to see the world. No one does it better than the people of American Airlines and I am extremely proud to be on your team. My responsibilities include ensuring your airline behaves in a way that will always make you proud, and you can rest assured that is the case here.

Happy Fourth of July to each of you and your families. Thank you for all you are doing for our customers over this holiday weekend and all you do every day for American Airlines.

Doug

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