Are Major U.S. Airlines Really Colluding? Former Continental CEO Doesn't Think So

According to recent reports, several major U.S. airlines including American Airlines Group Inc AAL, United Continental Holdings Inc UAL, and Southwest Airlines Co LUV have received subpoenas from the U.S. Department of Justice (DoJ) as part of an investigation for possible collusion in keeping the seat capacity limited and thereby keeping ticket prices high.

Former Continental CEO, Gordon Bethune, was on CNBC Thursday to discuss if the airlines are really colluding.

Smart People

"They are smart people and the smart people usually come up with the same correct answer," Bethune began. "2 and 2 is 4, so, that's not collusion. That's just making the correct answer to the issue of how many seats do we want to try to sell. You shouldn't try to sell more than you can sell."

'You Are As Good As Your Dumbest Competitor'

Bethune elaborated on his point, saying, "Look at how many people went bankrupt and people lost their pensions, [while] the taxpayers ate the pension. But the employees lost their job. Those guys are gone, you are only as good as your dumbest competitor. Those guys are kind of all gone and we have got about 4 mainstream airlines all run by very intelligent people. And they are making a business and paying their employees. I think that's great."

Not Trying To Buy Market Share

On why the DoJ is investigating the airline industry specifically when a lot of other major business sectors in the U.S. generally have 4 major players that control most of the market share, Bethune said, "Four [of] those guys are head-to-head [and] on almost every market. So, there's lots of competition between Sarasota, Florida, and Spokane, Washington., everybody will get you there. It's always very price competitive."

"But they are not trying to buy market-share because you can't do it because your competitors is just going to match it and you will both lose money and that's what is going on."