Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 14, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2147 words
HEADLINE:
TESTIMONY June 14, 2000 PETER G. FITZGERALD SENATOR HOUSE
JUDICIARY AIRLINE HUBS; UNITED US AIR MERGER
BODY:
Peter G. Fitzgerald United States Senator
Illinois Statement Submitted to the Committee on the Judiciary United States
House of Representatives Concerning The State of Competition in the Airline
Industry Washington, D.C. June 14, 2000 Introduction Chairman Hyde,
Representative Conyers, and members of the Committee, thank you for inviting me
here today to discuss competition-or the lack of competition-in the airline
industry, a subject that is very important to my constituents in Illinois.
Chairman Hyde, I would like to take this opportunity to thank you personally for
your consistent leadership on this issue, and for your foresight in convening
this hearing. United-US Airways Merger Given the recent
announcement by UAL, the parent company of number-one ranked United
Airlines, that it intends to purchase US Airways, the
sixth largest U.S. airline, the timing of this hearing could not be better. If
approved, this would be the biggest airline consolidation in U.S. history,
leaving United with control of about 27 percent of all flights in the U.S.
market-almost double the market share of its next largest competitor, American
Airlines. Needless to say, a deal of this size raises serious questions about
how it will affect competition. With one less competitor in the marketplace, and
with United controlling so many coveted routes, will fares go up? Will service
to less profitable destinations be cut back or eliminated? Will smaller
competitors be squeezed out of markets and airports? Will air travelers have
more choices, or fewer? Will such a merger force other airlines
to follow suit, resulting in three or four "mega airlines" that dominate the
U.S. market? These are all relevant questions, but the overarching question is
this: Is United s merger with US Airways in the flying public s
best interest? Because I am concerned that the friendly skies are becoming too
cozy from a competitive standpoint, I join Chairman Hyde in calling on the
Department of Justice to conduct a rigorous examination of this proposed
consolidation. Third Chicago Airport Mr. Chairman, as you know, I am no stranger
to aviation issues. Since being elected to the Illinois State Senate in 1992, I
have supported building a third airport in the Chicago area. I support a third
airport because I believe O Hare International Airport-which serves as a major
hub for both United and American- has reached its capacity. In other words, it s
out of room. It simply cannot handle any more flights without exacerbating
already intolerable delays. In April of this year, the Federal Aviation
Administration reported that only about two-thirds of flights into O Hare
arrived on time, and only about 70 percent of flights departed on time. So while
O Hare may no longer be the world s busiest airport, it remains one of the most
delay plagued in the country. And there is a hefty price tag attached to these
delays-for business travelers, in terms of wasted time sitting on the tarmac
waiting to take off, or in the air circling the airport waiting to land, and for
the airlines themselves, in terms of wasted fuel, exhausted and angry
passengers, and additional overhead expenses. Unfortunately, I am afraid these
problems are only going to get worse. Despite my opposition in the Senate-and
your opposition, Mr. Chairman, in the House-Congress this year passed
legislation, signed into law by President Clinton in April, phasing out the cap
on the number of flights allowed to take off and land at O Hare. This cap, known
as the High Density Rule, was put in place by the Federal Aviation
Administration in 1969 to limit delays. The result of lifting the flight
restrictions is predictable. The Chicago Tribune reported in April that, by the
end of this summer, "air traffic in and out of O Hare could expand as much as 20
percent, adding 500 flights to the current 2,500 a day." And the number of
flights at O Hare will only increase when the flight caps are completely removed
by the summer of 2002. All of this, of course, comes on top of the Federal
Aviation Administration s recent projection that the number of passengers
traveling aboard commercial airlines will increase exponentially over the next
decade, growing from 664.5 million in 1999 to more than 1 billion in 2011. If O
Hare cannot manage its current load of flights, how on earth can it possibly
expect to absorb the additional flights that will be required to meet future air
travel demand? The answer is it can t. O Hare is out of capacity, and a third
Chicago-area airport needs to be built, and needs to be built soon. SOC Report
So what is stopping the State of Illinois from building a third Chicago-area
airport, an airport that has been in the planning stages for over 15 years? The
answer may be the influence of the airlines themselves. A recent report by the
Suburban O Hare Commission (SOC), a group representing more than one million
residents who live in communities surrounding O Hare, alleges that there is a
lack of competition at O Hare and other major airports due to the airlines
efforts to preserve and expand their "monopoly power" at "Fortress Hub"
airports. The report, entitled "If You Build It, We Won t Come: The Collective
Refusal of the Major Airlines to Compete in the Chicago Air Travel Market,"
provides credible evidence that there is a de facto agreement among the "Big
Seven" airlines that each airline will stay out of the other s Fortress Hub
cities. According to this report, conspiring to carve up the market in this way
violates federal antitrust laws and costs the nation s air travelers billions of
dollars each year in artificially high air fares. The SOC report also alleges
that the airlines tacit agreement not to compete in each other s Fortress Hub
markets explains why sixteen airlines signed a letter to then-Illinois Governor
Jim Edgar on January 17, 1995, saying, essentially, if you build a third
airport, we won t use it. With O Hare at or near capacity, and with United and
American controlling over 80 percent of all flights at O Hare, you would think
the other airlines would be falling all over themselves for a chance to compete
in the Chicago market. The fact that the airlines are fighting to block
additional capacity-and all but ensure United and American s dominance in
Chicago-leads me to believe that, as far as real competition is concerned, they
are merely keeping up appearances. Conclusion In closing, I would like to thank
the members of the Suburban O Hare Commission for producing this report and
bringing it to Congress attention. The Suburban O Hare Commission s report and
the proposed consolidation of United and US Airways offer
Congress, this committee, the Department of Justice, and the Department of
Transportation an excellent opportunity to examine the state of competition in
the airline industry, in individual markets, and at individual airports. If it
is found that competition is lacking, it may be necessary for Congress to
intervene with legislation to ensure that vigorous competition is able to
flourish in every market and at every airport. Thank you, Chairman Hyde and
members of the committee, for this opportunity to present my views. I look
forward to working with the Committee as this issue develops.
LOAD-DATE: June 19, 2000, Monday
