Washington, D.C. — Ahead of the Federal Trade Commission’s (FTC) virtual public workshop on how predatory pricing harms competition and consumers, the American Economic Liberties Project today released a new report, “Predatory Pricing in Airlines: How Southwest Lowered Prices to Squeeze Out Competition in Hawaii.” The paper, which exposes how Southwest Airlines systematically charged below-cost fares on inter-island routes in Hawaii, is coauthored by Economic Liberties’ William J. McGee, who will appear on a panel at the FTC’s workshop this week.

“Predatory pricing in airlines might look good for consumers in the short term, but the truth is that it’s a disaster for competition and ultimately raises prices,” said William J. McGee, Senior Fellow for Aviation and Travel at the American Economic Liberties Project. “Southwest’s aggressive below-cost pricing pushed Hawaiian Airlines to the brink, slashed their ability to compete, and consolidated the industry further to the detriment of the public interest. In the end, Southwest’s actions forced Hawaiian to consider either bankruptcy or a merger. This type of consolidation not only limits options and entrenches dominant carriers’ power, but sets up these companies to impose price hikes later on without competitive pressure. It’s time for enforcers to reinvigorate enforcement to stop this anticompetitive practice and protect consumers from further harm, which is why we’re thrilled the FTC is conducting a workshop on this problem.”

The report outlines how Southwest Airlines, despite its national profitability, sustained significant financial losses on interisland Hawaii routes, pricing tickets as low as $39—well below break-even levels. This created unsustainable market conditions for Hawaiian Airlines, which lost over $260 million in 2023, ultimately leading to its merger with Alaska Airlines. The paper warns that without stronger enforcement of antitrust and predatory pricing laws, smaller airlines across the country will continue to be destabilized by dominant carriers, harming consumers in the long run. The failure to enforce predatory pricing laws has led to increased industry consolidation, reduced competition, and potential long-term price hikes for consumers.

Read the full paper here.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.