Feds Create Turbulence for Hub-Happy Airlines

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This announcement is for airline bosses sitting in the first class section: Fasten your seat belts -- you are about to encounter turbulence. Yes, on Thursday Attorney General Janet Reno announced the launching of a major antitrust suit against American Airlines. The charge: predatory practices by American at its Dallas-Fort Worth hub -- such as the calculated use of lower fares and more flights -- to push out start-up airlines. "This is the first major action of its kind since deregulation of the industry in 1978," says TIME senior business writer John Greenwald. And together with the departmentís announcement that it is investigating similar practices by other airlines, "it looks like Justice has decided to focus on one of the major consequences of that deregulation," he says.

Passengers and smaller airlines have long complained that the major carriers have used deregulation to concentrate their power around key travel hubs, which they then use to chase out competitors and raise prices. "Justiceís move squarely addresses one of the major tactics large carriers have used to create fortress hubs," says Greenwald. It is also another indication that the resurgent antitrust division, under the activist leadership of Joel Klein, is determined to have an impact on the conduct of the nationís business. Though the division has been tolerant of most mergers, says Greenwald, "it has been wary of large amounts of power once they exist and has gone after what it perceives to be abuses of monopolistic power." The case against Microsoft has been the most notable recent example; now it is American's turn.