Will the United CEO Resignation Have Unintended Consequences for the Airline Antitrust Case?

September 21, 2015

Professor Randall Eliason has written an excellent blog post on the resignation of Jeff Smisek, the CEO of United Airlines, and two other executives. The media reports have focused on Mr. Smisek’s possible role in the Bridgegate scandal.

As background, The New York Times explained:

United Airlines abruptly replaced its CEO as a federal investigation continued into whether the airline gave preferential treatment to the former chairman of the agency that operates the New York-area airports.

United Continental Holdings Inc. said Tuesday that Jeffery Smisek and two other senior executives had stepped down. Oscar Munoz, a railroad executive and head of United’s audit committee, was named CEO and president.

Federal prosecutors are probing United’s ties to David Samson, the former chairman of the Port Authority of New York and New Jersey. United began a direct flight between Newark, New Jersey, and Columbia, South Carolina, where Samson has a summer home, while he was chairman and ended it days after he resigned last year. United, the dominant airline at Newark Liberty International Airport, was negotiating with the Port Authority over projects at the airport at the same time.

What I keep wondering is whether these United resignations may have some unintended consequences for the entire airline industry.

There is a major, ongoing, high-profile investigation into possible antitrust violations by the airline industry. American Airlines and Southwest Airlines have confirmed that they have received subpoenas. As Bloomberg reports:

U.S. airlines face an antitrust investigation by the Justice Department into whether they are discussing how to control the supply of seats, a crucial factor in determining fares.

American Airlines Group Inc. and Southwest Airlines Co. confirmed receiving Justice Department requests for details of conversations, meetings and conferences where industry capacity was discussed. The department said an inquiry was under way into possible coordination among carriers but wouldn’t give details.

Perhaps even more important, United has been contacted about the antitrust investigation as well.

If Mr. Smisek has information about the antitrust issues being investigated, well, that could prove very useful to the Department of Justice. A massive antitrust conspiracy is much sexier than setting up a flight to benefit a Port Authority official.

If Mr. Smisek has this kind of information–information that could implicate others at United or other airlines–then he could decide to cooperate with DOJ in the antitrust investigation in an attempt to avoid being charged in the Port Authority matter.

This wouldn’t be the first time an individual investigated in one matter turns out to be a cooperator in another one. Knowing a company’s secrets is a powerful thing.

I have no inside baseball here. But I wonder, I wonder, I wonder…

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