May 13, 1999
Web posted at: 1:22 p.m. EDT (1722 GMT)

WASHINGTON (CNN) -- The U.S. Justice Department has filed an antitrust lawsuit against American Airlines, charging that the major carrier has tried to monopolize service to and from its Dallas-Fort Worth base.

Attorney General Janet Reno on Thursday said her department's anti-trust division, under the leadership of Assistant Attorney General Joel Klein, is charging American with adopting a calculated strategy to drive low-cost, start-up airline carriers out of that market.

"They did this by saturating their routes with additional flights and cutting their airfares," said Reno. "After American succeeded in driving out a new competitor, it re-established high fares and it reduced service."

Reno said American Airlines invested in short-term capacity increases and airfare reductions in order to maintain its monopoly. The government sued after negotiations with the airline broke down.

American issued a statement saying the allegations "are unwarranted and go against the very essence of free-market competition. American will mount an aggressive defense and is confident that its actions in Dallas-Fort Worth will prove to be nothing more than those of any tough competitor in a highly competitive industry."

DFW is the nation's third-largest airport and American dominates service there, flying more than 70 percent of all nonstop passengers who travel through it. American is the nation's second-largest carrier, the largest being United.

After airline deregulation in 1978, major carriers established hubs to concentrate their traffic through one or more airports. While hubs provide some conveniences for passengers, hub carriers frequently charge higher fares on hub routes with little competition. Low-cost carriers often can provide competitive alternatives to the hub carrier, generally offering fare cuts of 50 percent or more.

Reno said American violated anti-trust law by increasing its fares by more than 50 percent after it drove Vanguard Airlines out of the Wichita, Kansas, airport. The lawsuit also accused American of taking aim at Sun Jet's routes to Long Beach, California, and Western Pacific's to Colorado Springs, Colorado.

Reno said the department's objectives are to provide consumers with greater choices and lower prices for air travel.

"Consumers shouldn't have to pay sky-high prices because one airline is trying to keep out low-cost competitors," said Reno.

The lawsuit -- filed in U.S. District Court in Wichita, Kansas -- asks the judge to declare that the practices violate antitrust law; that a permanent injunction be entered to stop American from engaging in allegedly predatory acts; and that restraints be imposed to remedy the effects of such alleged past acts.

"The lawsuit we have just filed is designed to accomplish one thing -- to protect competition in the airline industry which, in turn, will lower prices and expand choices for our traveling public," Klein said.

Klein said the Justice Department's investigation into anticompetitive practices in the airline industry is continuing. The suit against American is the first filed since the probe began.

This is the second case the division has brought alleging monopoly tactics by American. In 1983 during the Reagan administration, the division charged that American's then-president, Robert L. Crandall called his major competitor at DFW, president Harold Putnam of Braniff, and proposed that they coordinate fare increases. Putnam was taping the conversation for Justice investigators, who ultimately got Crandall and American to agree to a court order barring such activity in the future.

CNN Correspondent Terry Frieden, The Associated Press and Reuters contributed to this report.

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