Looking Back: Was AirTran Making a Strategic Move?

Earlier this year, a Washington, D.C. law firm filed a lawsuit against AirTran Airways and Delta Air Lines, insisting that they engaged in anti-competitive behavior when they each implemented a $15 checked baggage fee.


In October 2008, neither Delta nor AirTran had implemented baggage fees however both airlines were certainly considering the idea at the time. During a phone call with analysts, AirTran Airway's CEO Bob Fornaro mentioned that AirTran did not want to be a first mover on the baggage fee because of the intense competition with Delta in Atlanta. He stated however that if Delta were to add a $15 baggage fee, AirTran would "strongly consider it."

This is where the lawsuit comes into play. The law firm argues that Fornaro's statement was a signal to Delta and therefore the airlines colluded on the fee increase. Now, why would AirTran and Delta do such a thing? To increase revenue of course. According to an article posted in USA Today, in Q2 2009, both AirTran and Delta each more than tripled their baggage fee revenue from the previous year.

So now the question is whether or not AirTran's CEO was intentionally making a strategic move by hinting to Delta that AirTran would match a checked baggage fee. Given the huge increase in revenue, it seems that might indeed be the case. What do you think?

http://blogs.orlandosentinel.com/business_tourism_aviation/2009/05/lawsuit-alleges-airtran-and-delta-unfairly-colluded-on-baggage-fees.html
http://www.usatoday.com/travel/flights/2009-09-24-airlines-fees-revenue_N.htm