Fare Game

by Cade Haddock Strong

  “Just some water.”

  They walked back toward the kitchen and Kay sluggishly pulled two glasses out of the cupboard next to the sink and filled them each with tap water. It was like watching a video in slow motion. “Ice?”

  Riley shook her head and accepted one of the glasses. “Are you going to tell me what’s going on?” she asked, not even trying to keep the concern out of her voice.

  “Follow me,” Kay said.

  Riley’s anxiety mounted as they climbed the stairs to the study on the second floor. When Kay had given her a tour of the house a few days earlier, the study had been immaculate, not even a paper clip out of place. Today, the room looked like it belonged to a mad scientist. Papers were strewn everywhere, a pizza box and a dirty plate sat on the small couch in the corner, crinkled soda cans littered the coffee table and two laptops sat open on the desk.

  The needle on Riley’s concern-o-meter inched into the red zone. It was like someone had kidnapped the dashing confident Kay Corbett and replaced her with a deranged, glassy-eyed look-alike. Riley briefly wondered if Kay was on drugs. She seemed to be getting thinner by the day and she’d occasionally been jumpy and bitchy, a bit on edge. It didn’t fit, though. Kay was way too obsessed with health and fitness to be messed up on drugs. Wasn’t she?

  Kay cleared off a nearby chair, pulled it up to the large wooden desk and motioned for Riley to sit. Kay squinted like she was in pain. After a long silence, she said, “Last Sunday, when we were at the office...”

  “Uh-huh.”

  “You came up to my floor, and I was—”

  “Just coming out of Greg’s office.”

  Kay crossed her arms. “I was in there for a good reason.”

  “Okay. I believe you.”

  “Then…” Kay scratched her head. “What were you and Greg talking about before the Kamadori meeting?”

  “God, I don’t even remember,” Riley said. “Nothing important.” She sat back in her chair and stared at Kay. “Why does it matter?”

  Kay sat up straight and stared back at her. “I’m about to tell you something really fucked up. Promise me you’ll hear me out…and give me your word you won’t tell another soul.”

  “Fuck, you’re freaking me out, Kay, but yes, you have my word.”

  Kay opened her mouth to say something and then snapped it shut.

  “What is it Kay? Talk to me.”

  Kay’s eyes hardened. “There is some really, really bad stuff going on at Logan. Like people might go to jail kind of bad stuff.”

  The hair on the back of Riley’s neck stood up. “I don’t understand,” she sputtered. “What are you talking about?”

  “It started years ago, but I didn’t realize it was going on until I got promoted to VP.”

  “Realize what was going on?”

  “A massive price fixing scheme involving Logan and a number of other airlines…”

  Riley couldn’t believe what she was hearing. She crossed and then uncrossed her legs. “I don’t, I… What do you mean?”

  “Logan, or Greg Brandywine, to be specific, is communicating with other airlines to set airfares. That’s why, lately, the airline has been able to get away with so many fare increases, across the board.”

  “You’re fucking kidding me.”

  “I wish I was.” A sad smile crossed Kay’s face. “Greg’s in deep, really deep. He’s the de facto leader of a little group he derisively calls Concordia. Concordia is a Latin word that roughly means agreement or harmony in English.”

  “Okay,” Riley said with a nervous laugh. “Latin was never my strong suit, but I’ll take your word for it.”

  “Anyway,” Kay continued. “Concordia is comprised of pricing representatives from Logan and a handful of other airlines. The group sometimes convenes in person, but lately they’ve been communicating by phone, on a regular basis, and even though it’s totally fucking illegal, they discuss pricing.”

  “Are you trying to tell me that Logan and the other airlines have been colluding to set prices?”

  Kay shifted in her seat. “That’s exactly what I’m saying.”

  “Holy shit, that’s huge.”

  Kay took a sip of her water. “Yeah, fucking huge.”

  “How do they do it? I mean, how do they get away with it?”

  “It’s complicated and simple at the same time. Most of their scheming surrounds surcharges—you know what those are, right?”

  Riley tilted her head to the side and shrugged. “Yeah, of course, at least in theory.” Working in Finance, she was well aware of surcharges. They added a lot to Logan’s bottom line, but she didn’t really understand how they worked.

  “Let me try to explain,” Kay said. “Surcharges are an incredibly handy tool in the wild and wacky world of airline pricing. They’re generally a fixed amount—say $100—that gets added on to the published airline fare, and more often than not, they’re applied across all citypairs in a given market. For example, you’ll probably see the same surcharge applied to all citypairs—Atlanta-Paris, Atlanta-Amsterdam, Atlanta-Frankfurt etc., in the transatlantic market. Airlines like surcharges because they are a quick and easy way to effectively increase or decrease airfares across an entire market all at once. Kay took another sip of her water and looked over at Riley. “Are you with me so far?”

  Riley was enthralled. “I think so…You’re saying, Logan might have a published fare of $500 to travel roundtrip from New York to London, but then they tack on a surcharge, $100 in your example, so the passenger pays $600, plus tax, right?”

  “Yeah, that’s the gist of it. As I’ve said, airline pricing is incredibly complex. In reality, Logan doesn’t have just one published fare between London and New York, there could be hundreds, maybe even thousands. The fare a passenger sees depends on a million factors such as when they book and when they want to travel, but that’s what makes the surcharge scheme even more genius. The airlines in Concordia just have to change one number—the amount of the surcharge—and boom, all fares in a particular market go up or down. That’s a heck of a lot easier than changing every single published fare in the market.”

  Riley was on the edge of her seat, and although Kay had started talking faster and faster, she hung on her every word. “Shit, that is genius. Fucked up, but genius,” she said. “Is Greg the one who dreamed this all up?”

  “Yes and no,” Kay replied. “He inherited the price fixing from his predecessor, but he’s since perfected it. He’s the one who suggested they use surcharges as their lever. I know because he brags about it, although I must admit, it was very clever on his part. It also happens to be a sneaky way to conceal what the airlines in Concordia are doing.”

  “How do you mean?”

  “Well, using your example, Logan can hold their London-New York published fare steady at $500 while simultaneously driving up the overall fare—the fare the passenger actually pays—simply by increasing the surcharge from say $100 to $125.”

  Riley got the idea. “So the airlines don’t have to be perfectly aligned in their published fares—Logan may charge $500 and Zephyr $510 for travel between New York and London, but behind the scenes—”

  “They’re increasing surcharges in lockstep,” Kay said. “And, not only that, surcharges are buried in the price of an airline ticket. That makes them more inconspicuous.”

  Riley shook her head. She was utterly dumbfounded. “Doesn’t it occur to them that someday, someone will catch on to what they are doing? I mean, we’re talking an Enron-like scandal. Did people learn nothing from that?”

  “Who knows? They’re all so damn arrogant. In Greg’s case, he thinks he’s smarter than everyone else.”

  Riley couldn’t get her questions out fast enough. “So, how did you find out about this secret little group?”

  Kay had regained her composure, and aside from her coffee-stained hoody and wild hair, she almost seemed herself again. “Well, once I became a VP, Greg started including me in Concordia meetings and confere
nce calls and I—”

  Riley’s eyes went wide. “Wait, what? He invites you to the meetings?”

  “Yeah, at first, I couldn’t believe he looped me in to what was going on, but eventually I realized he really didn’t have a choice. I mean, I am the VP of International Pricing. If I was in the dark about Concordia, I’d most certainly push back if he constantly told me when and by how much to increase fares in the markets I oversee.” Kay grunted and shrugged. “I’ve also come to understand Greg’s so corrupt, he’s completely lost touch with how crazy illegal it all is.”

  Riley’s head was spinning. Kay’s story was insane. She squirmed in her chair. “How did you react when Greg first invited you to one of these meetings? You must have freaked.”

  Kay laughed. “To put it mildly. I was completely flabbergasted. The price fixing is so incredibly blatant.”

  “So, how does Concordia operate? Is there some sort of secret handshake?”

  “The group agrees on a surcharge increase, and then bingo. Practically overnight every single one of the airlines in the group implements it.”

  “How do they know for certain everyone in the group will follow along?”

  “Well, funny you should ask,” Kay answered. “I asked Greg that same question once and he, in his typical condescending tone, explained to me that the members of Concordia made a vow early on to never ever deviate from the agreed upon plan. It was as simple as that. The whole thing is stunning both in its precision and its scope.” Kay turned toward the computers on her desk. “Here, let me show you.”

  Riley inched her chair closer and peered over Kay’s shoulder at the laptops, both of which displayed spreadsheets with rows and rows of numbers.

  “This is surcharge data from Logan and the other airlines in Concordia. I’ve been tracking them.” Kay clicked on one of the spreadsheets. “And I’ve made all these graphs.”

  “Oh, wow, where did you get all this data? I mean, I know you’d have access to fares Logan filed, but what about the other airlines.”

  Kay leaned back against her chair and looked at Riley for a long while before she responded. “I downloaded the data off of Greg’s computer a few weeks ago.”

  Riley was stunned. “You mean you—”

  “Yes.”

  “That’s—”

  “I know.”

  Riley took a minute to process what Kay was saying. She’d always been a strict rule follower, and Kay had just admitted to… She looked Kay in the eye. “That took some serious guts. If I’d been in your shoes, I probably would have done the same thing.”

  Kay visibly relaxed. “Really?”

  “Yeah, really. It may sound weird under the circumstances, but I’m proud of you.”

  “Thanks, I think.” Kay stood up and paced. “God, I was so worried about how you’d react. Under normal circumstances, I don’t go snooping in people’s offices.”

  “The circumstances are anything but normal,” Riley said with a laugh. “Have you told anyone else?”

  “No one, well, no one else at Logan. My best friend Ethan knows, but that’s it.”

  Riley’s head began to pound. She pinched the bridge of her nose. “You’ve got to tell someone Kay, like HR or Legal or something. You have to blow the whistle on this whole Concordia thing.”

  “That’s exactly what I intend to do, just not yet.”

  “Aren’t you worried you’ll get caught up in this mess? I mean, right now you’re an acting participant and you could be found guilty if—”

  “I’m well aware of the risks,” Kay snapped. She let out a long sigh. “Sorry, it’s all just so stressful.”

  “I can imagine.”

  “Greg would fire me in an instant if I pushed back on anything Concordia had done.”

  “And if you get fired, Concordia will keep marching on…”

  Kay sat back down. “Exactly, but at the same time, I have to be patient. I need solid evidence before I can accuse a Senior VP, and a bunch of other senior leaders of a major airline of price fixing.”

  Riley slapped a hand on her thigh. “Have you considered…What if this whole price fixing thing is just the tip of the iceberg, a small piece of a much larger scheme?”

  “Say more.”

  “Like, what if Logan is manipulating their finances—using the higher fares to cover up problems in other parts of the airline?”

  “You mean like using the money from the surcharges to prop up the airline’s balance sheet?”

  “Uh-huh,” Riley said.

  “That thought had crossed my mind, but I don’t have any hard evidence to back it up. Still, I think it’s a very real possibility. The fraud might bleed into other parts of the airline.” Kay tapped a finger on her desk. “Now that I think about it… On Logan’s last earning call, Howard Rome went out of his way to tout the airline’s increasingly diverse revenue base.”

  “You’re right. I remember him mentioning that Logan was getting a larger and larger percent of its revenue from non-ticket items like bag fees and those stupid Logan branded credit cards. He knows that’s what Wall Street wants to hear these days. But what if revenue from checked bags and all that other stuff really isn’t growing? What if they’re just using the higher fares—which are only achievable because they’re fixing prices—to make it look like they are.”

  “You mean like moving money around?”

  “That’s exactly what I mean.”

  “If that’s the case, it would mean…”

  Riley spread her arms wide. “Yeah, that this thing could be a whole lot bigger. They could be outright defrauding investors.” She looked Kay in the eye. “I want to help you.”

  Kay was desperate for an ally but she needed to make sure Riley understood the risks. “This is not something you can enter into lightly. We could lose—”

  “Our jobs,” Riley said. “I know.”

  “That, and a whole lot more. People, powerful people could come after us, threaten us. Not to be overdramatic, but people have lost their lives for sticking out their neck and blowing the whistle.” Kay pointed toward her computer. “I could show you dozens of horror stories.”

  “I’ve seen some of the stories. We studied them in business school.” She paused briefly and said, “I’m willing to take the risk.”

  “You need to be sure, really sure. Take some time to think about it. When I first started down this road, I thought long and hard about what it could mean for me, for my life. I briefly considered leaving Logan but given my history and my father’s history with the airline, I didn’t want to turn my back on it and all the good people who work there. Instead, I decided to stay put and do what I could to expose the truth. If I had kids and a family to support, the decision would have been a lot harder.”

  “I don’t need any more time to think about it. I’m in.”

  Chapter Eighteen

  First thing the next morning, Riley cleared her calendar of all but the most essential meetings and locked herself in her office. Her new mission in life was to figure out what other illegal and immoral crap was going on at Logan. The night before, she and Kay had decided she should start with the low hanging fruit—the financial reports Logan and every other publicly traded company filed with the Securities and Exchange Commission (SEC) each quarter. Riley had an MBA, and she knew her way around corporate financial filings better than most people. In fact, she sometimes read them for fun.

  She navigated to the investor relations page on Logan’s website and downloaded the airline’s financial reports for the last twelve quarters. Some of the reports were as long as a hundred pages so she only printed out those for the previous four quarters and saved the rest to a thumb drive so she could review them later.

  Next, she scrolled through the hundreds of folders situated on the shared drive she and her colleagues in Finance used to store all of their internal documents. It was somewhat mind numbing. She opened Excel spreadsheet after Excel spreadsheet and stared at an endless stream of graphs and charts.
Everything seemed pretty innocuous. Financial projections under every possible scenario: high oil prices, low oil prices, soaring global GDP, plunging domestic GDP, expanding Logan’s capacity, reducing it, closing one of their hubs, opening a new one, you name it.

  Riley was about to get up and go in search of coffee when she spotted a folder named CNCRDIA. Was it possible? She clicked on it. There were dozens of Excel files in the folder, each corresponding to a different quarter. 3Q2018.xlsx, 2Q2018.xlsx etc. The files went back at least five years. Riley tried to open one, but it was password protected. Same for the next one, and the next. “Shit,” she muttered and continued down the line, clicking on file after file. “Bingo,” she said when the one labeled 1Q2016 finally opened without prompting her for a password. Before she looked at it, she went back and looked for the SEC filing for the corresponding quarter. When she found it, she pulled it up on the computer screen next to the Excel file from the CNCRDIA folder. Her heart began to race as she compared the numbers in the two files, most of them matched, but not all them…

  A soft knock on her office door startled her. She quickly saved the Excel file to her flash drive and got up to open the door. It was her boss, Gabe Suarez. He gave her a questioning look. “Hi Riley. Your door was locked.”

  She turned on her southern charm. “Oh, uh, gosh, was it?” Gabe didn’t really seem phased. If her past reviews were any indication, Riley was an exemplary employee, and from her perspective, she and Gabe had an excellent working relationship.

  “Do you have a minute?” he asked.

  Riley nodded and said, “Sure. Come on in.” She walked back toward her desk and that was when it hit her like a ton of bricks. Gabe, a man she respected deeply, might be a key player in the whole Concordia mess. He was the VP of Finance after all. If any financial funny business was happening at Logan, he had to know about it, right? She tried to push the thought out of her mind. Gabe was her mentor. Although it was unlikely, she held on to the hope he wasn’t involved. Suddenly, her legs felt like they might give out. She grabbed onto her desk and practically fell into her chair.