In a significant blow to the airline industry, France’s competition watchdog has imposed a €14.6 million ($15.3 million) fine on two airlines after uncovering a scheme to inflate ticket prices while slashing services for passengers traveling to the French Caribbean islands. The Autorité de la concurrence revealed on Wednesday that Air Caraïbes, Air Antilles, and the consulting firm Miles Plus were all involved in the illegal price-fixing conspiracy, which spanned from 2015 to 2019.

Collusion to Exploit ‘Captive Customers’

The investigation, which started with dramatic dawn raids, found that the airlines and the consultancy worked together to manipulate prices for air travel, leading to steep fare hikes that severely impacted both local residents and tourists. The watchdog’s findings pointed to a scheme that targeted the islands' residents, who, due to the lack of viable alternatives, were essentially "captive customers."

"People living in these territories already face a significantly higher cost of living compared to mainland France, and with few options for air travel, they had no choice but to accept inflated prices," the regulator explained in a statement. The price-fixing arrangements not only harmed residents but also dealt a blow to the islands’ vital tourism industries.

How the Scheme Unfolded

According to the competition authority, the airlines and Miles Plus engaged in a series of “non-aggression agreements” where they coordinated fares and restricted competition. The agreement prevented them from undercutting each other, allowing both airlines to keep prices artificially high. On top of this, the airlines agreed to slash services, creating a joint flight schedule that reduced available seating by 10%.

The severity of these violations is underscored by the fact that at the time, Air Caraïbes and Air Antilles were the only two carriers operating on these critical routes. The competition authority noted that air travel is an essential service in these territories, making the collusion particularly damaging.

A Sophisticated Effort to Hide the Truth

The airlines went to great lengths to conceal their illegal activities. According to the regulator, they were fully aware of their violations and employed "highly sophisticated" tactics to hide their discussions. The companies used pseudonyms, code names, and even enlisted Miles Plus as an intermediary to avoid detection.

One of the most disturbing elements of the scheme involved price-fixing related to emergency flights during Hurricane Irma in September 2017. As thousands of people fled the storm, the airlines allegedly took advantage of the vulnerable situation by further inflating prices, capitalizing on the desperate circumstances of refugees.

Heavy Fines Imposed

In response to these serious breaches of competition law, the Autorité de la concurrence imposed hefty fines. Air Caraïbes and its parent company, the Dubreuil Group, were fined €13 million, while Air Antilles' parent company, K Finance, faced a €1.5 million penalty. The consulting firm Miles Plus was hit with a €70,000 fine.

At the time of writing, Air Caraïbes, Air Antilles, and Miles Plus had not yet commented on the ruling.