The Airline Pricing Story That Confuses Losing Money With Breaking the Law
The most consequential weakness in Wendover Productions' How Airlines Price Flights is not its explanation of ticket prices. It is the way it turns complicated competition-law proceedings into a simple story of an airline caught selling tickets too cheaply and forced to stop. Canada's Competition Bureau tells a materially different story: Air Canada's case involved two separate legal phases, and the second, which would have determined whether the airline abused its dominant position, was never pursued. Cite ref="turn124510search3"/>
The Canadian case was about more than matching fares
The distinction becomes clearer in the actual legal record. The Competition Bureau's March 2001 application concerned Air Canada's response to two low-cost entrants, WestJet and CanJet, across seven routes. The Tribunal's July 2003 decision found that Air Canada had operated or increased capacity at fares below avoidable costs on two examined routes: Toronto–Moncton and Halifax–Montréal.
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This was not a superficial comparison of ticket prices. The proceeding lasted 40 days and involved 499 exhibits, two factual witnesses and three expert witnesses, including specialists in airline economics and accounting. The Tribunal examined which costs could actually be avoided by cancelling or reallocating a scheduled flight.
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There was another complication the video leaves out: connecting passengers. A flight that appears unprofitable when considered alone may bring passengers into an airline's wider network, generating revenue on subsequent legs. The Tribunal excluded this additional contribution from its initial cost calculation but recognized that network benefits could provide a legitimate business justification in the later phase.
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The Bureau later drew a line between matching and predation
In a 2015 submission, Canada's Competition Bureau explained the distinction that Wendover misses. Its general policy was not to pursue a dominant airline simply for matching, but not undercutting, a competitor's fares; enforcement could become appropriate when matching was accompanied by a significant capacity increase or more seats being offered at the lowest price.
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That distinction matters enormously for United. Wendover identifies matching Frontier's cheap tickets as evidence of likely losses, but supplies no evidence that United was flooding the Denver–Chicago route with additional flights or expanding the number of seats available at $40. It presents the fare response without establishing the conduct that would make the response particularly suspicious.
The Bureau's 2025 airline market study reinforces the distinction: it identifies simultaneous fare reductions and capacity expansion as a more serious warning sign than ordinary price cutting alone.
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The United example does not establish predatory pricing
Wendover says United was matching Frontier's $40 fares on Denver–Chicago flights despite having substantially higher operating costs. It concludes that United was “almost certainly losing money on those fares.”
That conclusion skips the most important calculation: United's own avoidable cost of operating the relevant flights.
A competitor's higher average operating costs do not establish that every discounted ticket it sells is unprofitable. Nor does a $40 ticket reveal how many seats were offered at that price, what restrictions applied, or how much revenue the flight generated from other passengers, connections and additional services.
The available historical fare records illustrate the problem:
- In December 2015, United advertised an $80 round-trip Chicago–Denver fare, including taxes, for limited January and early February 2016 travel. It required Tuesday or Wednesday departures and returns and purchase at least 21 days ahead.
The Flight Deal
- A July 2016 fare comparison listed Frontier's Denver–Chicago fare at $59 and United's at $41 on limited Tuesday–Wednesday dates.
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These are genuine low fares, but they are restricted promotional prices, not evidence of the average price collected across an entire aircraft. They also do not necessarily reproduce Wendover's precise fare search.
The distinction is important because the episode itself explains that airlines release limited numbers of seats into individual fare buckets. It never establishes how many United seats were available at $40.
What American antitrust law actually requires
The United allegation concerns the American market, so Canadian legal proceedings cannot establish whether United violated American law.
The US Supreme Court's 1993 decision in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. established two essential requirements for a predatory-pricing claim:
- The challenged prices must be below an appropriate measure of the company's own costs.
- There must be a reasonable prospect that the company can recover its losses through subsequent above-competitive prices.
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The second requirement is frequently forgotten. A company might sell below cost and hurt a smaller competitor, but if it cannot subsequently recover those losses, the strategy may benefit consumers through cheaper fares rather than harm competition.
Wendover provides no calculation of United's losses, no evidence of its ability to recover them, and no analysis of what happened to prices after Frontier left any particular route.
The video has identified a possible competitive strategy, not established predatory pricing.
United's history in Denver deserved better investigation
There is, however, a genuine historical reason to examine United's behaviour toward Frontier.
In 1998, Frontier presented allegations of predatory conduct before a US Senate committee. Its submission described United cutting fares when Frontier entered Denver markets, increasing flight capacity and subsequently raising fares after Frontier withdrew.
Frontier's own analysis claimed that United's fares in markets where Frontier competed averaged approximately 31% below United's estimated unit costs in December 1996. It also cited an increase of 8,600 weekly seats in the Denver–Los Angeles market after Frontier's entry.
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But these figures require careful attribution. The cost analysis was prepared by Frontier's CEO, Sam Addoms, using industry-wide cost estimates that were not adjusted for Denver-specific operating expenses. Frontier also acknowledged that it lacked proprietary information about the number of seats United actually offered at its lowest fares.
This was an airline's case against its competitor, presented to Congress, not a judicial finding that United had committed predatory pricing.
Nevertheless, it is substantially more informative than simply observing two airlines selling tickets for approximately $40.
The historical record offers an investigative lead. It does not establish that United repeated the same strategy in 2016.
Competition has measurable benefits that the episode underplays
The Canadian Competition Bureau's June 2025 study of airline competition provides a useful modern comparison.
Working with an independent economic expert, the Bureau examined pricing by Air Canada, WestJet and Porter across routes connecting Canada's 35 busiest cities. Its analysis covered January 2019–February 2020 and May 2022–October 2025.
It found that the airlines charged approximately 9% less, or C$27.80 less on average, when facing an additional competitor on a route. The study also found that the effect varied between airlines and weakened in several comparisons after the pandemic.
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This does not establish that United's conduct was legitimate. It demonstrates why low prices and competitive responses cannot automatically be treated as evidence of wrongdoing.
The same Bureau study specifically warns that more serious concerns arise when a powerful airline simultaneously reduces fares and increases available capacity to squeeze an entrant.
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That is the missing investigation in Wendover's United example.
The verdict
Wendover explains airline pricing mechanics clearly, but its treatment of predatory pricing is considerably less rigorous.
The Air Canada case produced a genuine finding that fares did not cover avoidable costs on two examined routes. A temporary order also restricted certain fares. But the full abuse-of-dominance case was never completed.
United's $40 fares present an even larger evidentiary gap. The video provides no route-specific cost calculation, no evidence of capacity expansion, and no demonstration that United could recover any alleged losses.
A cheap ticket is not proof of an illegal strategy.
The distinction matters because aggressive price competition is precisely what consumers need from airlines. If incumbents are allowed to drive out new competitors through sustained below-cost pricing, passengers may eventually pay more. But if every aggressive price match is treated as predation, regulators risk protecting established airlines from the very competition that makes flying affordable.
The episode turns a legitimate economic concern into a confident conclusion without doing the work necessary to establish it. That is its central failure.
References
1. How Airlines Price Flights — Wendover Productions, January 2, 2018. Original video and source of the claims examined in this critique.
2. Air Canada v. Canada (Commissioner of Competition), 2002 FCA 121 — Federal Court of Appeal, March 22, 2002. Documents the temporary restrictions imposed on Air Canada's fares and the legal limits of the Tribunal's review.
3. Annual Report of the Commissioner of Competition, 2003–2004 — Competition Bureau Canada, 2004. Identifies the two routes where Air Canada failed the avoidable-cost test and explicitly distinguishes that interim finding from a completed abuse-of-dominance determination.
4. Competition Bureau Submission to the OECD Global Forum on Competition – Economic Analysis and Evidence in Abuse Cases — Competition Bureau Canada, April 22, 2022. Documents the 40-day Air Canada hearing, 499 exhibits, expert evidence and the abandoned second phase.
5. Submission to the Canada Transportation Act Review Panel: Rail, Air and Marine Transportation — Competition Bureau Canada, February 27, 2015. Explains why ordinary fare matching was generally tolerated and why accompanying capacity increases could justify enforcement.
6. Cleared for Take-off: Elevating Airline Competition — Competition Bureau Canada, June 19, 2025. Provides recent economic estimates of competition's effect on airfares and identifies capacity expansion as an important warning sign.
7. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 — United States Supreme Court, June 21, 1993. Establishes the two central requirements for American predatory-pricing claims: below-cost pricing and a reasonable prospect of recoupment.
8. Frontier 15 Low Fares Denver-USA Routes Under $100 One Way — Loyalty Traveler, July 8, 2016. Provides a contemporary fare comparison showing Frontier at $59 and United at $41 on limited Denver–Chicago dates.
9. United – $80 Chicago–Denver Roundtrip, Including All Taxes — The Flight Deal, December 19, 2015. Documents the restrictions and advance-purchase requirements attached to United's exceptionally low fare.
10. Airline Competition, Senate Hearing 105-936 — US Senate Committee on Appropriations, 1998. Contains Frontier's historical allegations against United, including its cost calculations, capacity claims and the limitations of its own evidence.
11. Predatory Foreclosure, DAF/COMP(2005)14 — OECD Competition Committee, March 15, 2005. Provides additional detail on the Air Canada avoidable-cost proceeding, including the treatment of connecting-flight revenue and redeployable resources.