Keller Rohrback has stunned airline investors by filing an antitrust class action lawsuit against American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. The filing claims that the airlines and their co-conspirators conspired to raise the prices of air passenger transportation services for flights within the United States. The complaint, filed in the US District Court for Northern California, states that as a result of several airline mergers beginning in 2008, American Airlines, Delta Air Lines, Southwest Airlines and United Airlines now control approximately 80% of the domestic air passenger seats. During that period it says the airlines have taken steps to limit capacity growth in order to keep air fares artificially high. The filing goes on to claim that with fuel prices falling by 40% since last year, ticket prices should have followed. That they didn’t was the result of the airlines’ anticompetitive activities in violation of federal antitrust laws, including the Sherman and Clayton Acts. The lawsuit seeks damages for individuals who have purchased airline tickets at artificially high prices due to the airlines alleged agreement to restrict capacity.
When reading the complaint I wondered if it was some kind of joke. But joke it is not. People need to be educated on what the margins at airlines are per ticket, then set this against the margins being made by Apple in their latest gadget.
Meanwhile we have counted 17 instances of aircraft having to be redirected because of bomb threats over the past seven days across the globe. People should not underestimate the ability of terrorist groups or warped individuals to bring airlines to their knees with a simple phone call or the like. There is no doubt that the spate of threats against passenger aircraft has risen exponentially in the Western world of late, mirroring a trend that has been happening in China now for some years.
In China, mainland shares rebounded today after regulators took further steps to try to calm the stock market. The Shanghai Composite index reversed earlier losses to close up 5.76%, its biggest percentage gain since 2009. This comes after a move to ban big investors from selling stocks (I kid you not). The government is also pursuing those it accuses of vicious short-selling. The benchmark Shanghai index closed up 202.14 points at 3,709.33 after falling by more than 30% since mid-June. On Wednesday, the Shanghai Composite fell as much as 8.2%.
The Chinese government has relaxed lending rules - making it easier for people to borrow money for investment - in the hope that they will buy more stocks, while at the same time it has banned investors holding stakes of more than 5% in companies from selling shares for the next six months. About 1,300 firms have halted trading in their stocks to prevent the value of their businesses falling further. So as China quite literally imposes capital controls on stock markets, today is the latest Greek deadline for EU debt proposals.
As all this uncertainty continues to rumble on we all have to perhaps wonder why it is that so many sale and leaseback deals continue to close at manic rates? The MAS situation is a bit of a joke, some of the leased 737-800s went into MAS on the back of, shall we say, very keen sale & leaseback deals, now that the MAS Act has stripped all assets into one company and left a group of lessors in the shell, the lessors are being told to take aircraft back with not so much as a dime attached. This is an ongoing investigation for Airline Economics but you cannot help but feel that some of those sale and leaseback deals on 12 year terms contracted over the past three years are going to burn lessors badly, not to mention yet more 737-800s dumped onto the market further depressing CMVs and lease rates on the type in the short term. Has Malaysia set a precedent that all other countries could follow in efforts to save their flag carriers? The MAS Act story is a very big deal for leasing and it raises a number of serious questions – Watch this space for a full update.