Bird of Prey?

By John Greenwald

Frustrated flyers who insist that air travel is more costly, crowded and chaotic than ever won a powerful ally last week: the U.S. Justice Department. In an antitrust suit that stunned major U.S. carriers, Justice accused No. 2, American Airlines, of driving three small discount rivals out of Dallas-Fort Worth International Airport. Trustbusters said American flooded routes served by upstarts Vanguard, Sun Jet and Western Pacific with its own new flights and illegally slashed fares below the cost of providing the seats--a practice known as predatory pricing. American, which carries 77% of all passengers who fly nonstop from the third largest U.S. airport, scaled back the flights and moved prices back up once the newcomers fled. Vanguard has since returned; Western Pacific has filed for bankruptcy.

The suit--unveiled by Attorney General Janet Reno and antitrust chief Joel Klein--was the first to target alleged abuses at so-called fortress hub airports created by carriers like American after Congress deregulated the airlines in 1978. While consumer advocates welcomed the suit, legal experts said it would be tough for Justice to prove predatory pricing. "We didn't undercut," argues American spokesman Chris Chiames. "We matched fares set by others and added seats when the demand went up."

But smaller carriers view the suit as long overdue. "It has to be determined if there is anything in this industry that is unfair," says Sam Addoms, president and CEO of Frontier Airlines, a regional carrier based in Denver. "To date, it's been anything goes."

--By John Greenwald. Reported by Richard Woodbury/Denver

With reporting by Richard Woodbury/Denver