A German regulatory agency is accusing Lufthansa of unjustified price hikes in the wake of Air Berlin’s bankruptcy.
Germany’s Federal Cartel Office (FCO) is currently probing complaints that Lufthansa fares shot up on some routes after bankrupt rival Air Berlin stopped flying in late October.
Well, yeah…it is hardly surprising to me that fares shot up when a route served by two carriers is now served by one. If demand stays consistent but supply is greatly reduced…in what school of economics do prices stay the same?
Lufthansa argues that it has not changed its pricing methods. Rather, these changes are in direct response to increased demand and are set by longstanding automated pricing algorithms, not a deliberate pricing policy change.
But FCO President Andreas Mundt is not buying this explanation:
That’s beside the point. These algorithms aren’t written by dear God in heaven. Companies can’t hide behind algorithms.
Prices have jumped by as much as 30% on some routes. But Lufthansa points out it has not raised base fares in over a year. Instead, increased demand is simply leading to fuller planes and more expensive last-minute tickets.
And so it can happen that for last-minute reservations on some routes only the comparatively more expensive booking classes are available.
The good news for German consumers is that Lufthansa is not taking over all former Air Berlin routes. EasyJet will begin more robust service in Germany later this year.
Maybe I’m missing something, but this FCO inquiry seems like a witch-hunt to me. If Air Berlin failed to turn a profit selling cheap tickets, why is Lufthansa also expected to lose money?
So they’re saying they were capacity dumping before AB went belly up?
The biggest competitor to Lufthansa’s flights within Germany is now the railway. The opening of the new ICE line between Berlin and Munich in December, which reduces the length of the train journey from over 6 hrs to under 4, is particularly well-timed given AB’s collapse. Since the train stations are much more centrally located than the airports and you only need to arrive just before departure, it can actually be faster to travel by train.