Copyright 2000 eMediaMillWorks, Inc.
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Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 14, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 6947 words
HEADLINE:
TESTIMONY June 14, 2000 MIKE GORDON MAYOR CITY OF EL SEGUNDO
HOUSE JUDICIARY AIRLINE HUBS; UNITED US AIR
MERGER
BODY:
Testimony of Mike
Gordon Mayor City of El Segundo Before The Committee on the Judiciary House of
Representatives United States Congress Oversight Hearing On The State of
Competition in the Airline Industry June 14, 2000 Mr. Chairman, Ranking Member
Conyers, members of the Judiciary Committee. Thank you for this opportunity to
present the views of the City of El Segundo. Today's hearing brings into focus
the anti-competitive nature of the nation's largest airline carriers and the
negative consequences of the hub-and-spoke structure fostered by airline
deregulation. I am pleased to share with this committee our experiences in
dealing with the fortress hub phenomenon. The recent announcement of a proposed
merger between United Airlines and US Airways
certainly makes this issue all the more urgent. My colleagues and I oppose the
merger between United Airlines and US Airways.
The prospect of further concentrating market share in the hands of a small but
elite group of corporate giants represents the worst possible scenario for
commercial aviation and for the American consumer in the air travel marketplace.
That threat looms larger as industry analysts predict this deal will touch off
more mergers, more concentration of power, and further
reduction in airline competition as other airlines scramble to meet or beat the
United/US Airways stronghold. El Segundo is a community located
literally across the street from the third busiest airport in the world - Los
Angeles International Airport. We have witnessed first hand the crippling effect
of large airlines growing even larger and exercising their power over aviation
in our region with impunity. We are not alone in our concern over the fortress
hub empire the airlines have crafted in the wake of deregulation. More than 80
cities, counties and transportation agencies in Southern California have adopted
resolutions calling for the constraint of growth at the LAX hub airport in favor
of a more equitable distribution of air commerce to the many airports available
for commercial use in our region. The anti-competitive practices of giant
carriers such as United and the hub-and-spoke airport structure the airlines
have created have brought about a portfolio of negative impacts to Southern
California. Judging from the Suburban O'Hare Commission's report, Southern
California is not the only region of the country being held hostage by little
more than a handful of mega carriers. Among the most serious of negative impacts
caused by carrier domination and the hub-and-spoke structure in Southern
California are: 1. The creation of artificial airport capacity shortages 2.
Ticket price strategies that constrain the ability of existing and emerging
non-hub airports to accommodate growing demand 3. Loss of critical air service
to areas of the region facing the greatest increases in population and
employment 4. Serious threats to the safety of air travelers as overburdened hub
airports strain to shoehorn in more and more planes 5. Traffic impacts caused by
importing passengers to hub airports 6. Health risks associated with high
concentrations of air pollution around over-developed hub airports 7. Loss of
quality of life in communities pounded by noise from concentrated aircraft
operations 8. Economic loss to communities ready, willing and able to provide
air service but who are locked out of the marketplace by the hub-and-spoke
airport structure 9. Over-consumption of regional transportation dollars by hub
airports in order to facilitate the hub-and-spoke structure and the consequent
lack of resources to meet other regional transportation needs 10. The formidable
impediment that dominant airlines present to effective regional transportation
planning Current and Future Aviation Demand In Southern California To put into
perspective the backlash over hub-and-spoke aviation in Southern California
consider the current and future outlook for aviation in the region. Currently,
the five-county region of Southern California serves approximately 87 million
annual passengers and handles nearly two million annual tons of cargo. LAX, with
United Airlines at the forefront of both passenger and cargo
service, will handle approximately 64 million passengers and 2.1 million tons of
cargo this year. That means that one airport - LAX - handles more than 73
percent of the total demand for the region, one of the busiest regions in the
world. By the year 2015, Southern California is projected to serve over 150
million annual passengers. Under its proposed expansion plan, LAX will take in
up to 98 million of those passengers. 1. The Creation of Artificial Airport
Capacity Shortages The role of major airlines in creating artificial airport
capacity shortages via the spoke-and-hub structure that now reigns in commercial
aviation is evident at LAX. United Airlines is the top
passenger carrier at LAX, capturing more than 22% of the passenger market share
in 1998 - more than twice the market share enjoyed by United's closest
competitors, Southwest and American Airlines. And, United
Airlines is the second largest cargo carrier at LAX - second only to
Federal Express. In 1999, United Airlines completed a
$260-million terminal expansion and promptly introduced 69 new daily flights out
of LAX. United's capacity enhancements roughly coincided with the announcement
by LAX officials of the development of a Master Plan for a $12-$15-billion
airport expansion project. LAX, they said, was reaching its maximum capacity and
would have to be expanded to meet the region's current and future aviation
needs. Airport officials contend that failure to expand LAX will result in a
severe shortage of airport capacity and a commensurate economic loss to the
region. What LAX officials fail to acknowledge, however, is the fact that there
are 12 existing or potential airports in Southern California available for
commercial use, including a second 'international' airport. More than half of
these airport opportunities lie in the heart of the counties expected to
experience a large majority of the growth of the region. Nevertheless, LAX
remains the only airport in the region with a full complement of flight options,
LAX remains the only airport offering truly international air service and LAX
remains the only airport in Southern California where United and other dominant
carriers are willing to invest. The fact is there is NO SHORTAGE OF AIRPORT
CAPACITY in Southern California. The fact is the only shortage of capacity is at
the LAX hub, and that shortage is artificial. The fact is this artificial
capacity shortage is a direct result of the collective refusal of dominant
airlines to provide adequate service at non-hub regional airports. 2. Ticket
Price Strategies That Constrain the Ability of Existing and Emerging Airports to
Accommodate Growing Demand To further reinforce dependence on hub airports, the
airlines engage in ticket pricing strategies that render non-hub airports
non-competitive. Airlines implement cost-recovery measures at smaller airports
in the form of higher ticket prices in order to finance investments at their
hubs. And by implementing such cost recovery measures, airlines create a vicious
cycle wherein passengers are forced away from alternative airports and back into
the hub airport. Despite reduced landing fees and lower operating costs, the
airlines overprice fares at non-hub airports. At Ontario International Airport,
for example, the cost to fly to Florida is $431. The fare to Florida from LAX,
on the other hand, costs only $230. This same pattern and practice of
overpricing tickets is duplicated at other non-hub airports throughout the
region, as shown in this cost comparison: Lowest Fares Destination LAX Ontario
Orange County Burbank Boston 358 917 928 928 Detroit 230 498 368 462 New York
298 428 498 498 Philadelphia 288 884 896 884 Washington, D.C. 398 917 896 896
Source: Los Angeles Times 6/4/00 The practice of overcharging passengers for
same-destination flights results in reduced usage at non-hub airports and
creates an artificial need for additional capacity where the airlines want it
most - at the stronghold hub airports. 3. Loss of Critical Air Service to Areas
of the Region Facing the Greatest Increases in Population and Employment The
refusal of dominant airlines to invest in non-hub airports, inequitable pricing
strategies and unjustified capacity enhancements at large hubs conspire to
deprive safe, convenient and affordable air travel in areas of Southern
California expected to receive the greatest increases in population and job
growth. Southern California is expected to grow in population equivalent to two
cities the size of Chicago. One of those Chicago-size growth areas is in the
Inland Empire - San Bernardino and Riverside Counties. There are five existing
airports available for commercial use in the Inland Empire. Three were made
available by military base closures. Despite the abundance of airports, the
Inland Empire's growing resident and business population must travel up to 80
miles to Los Angeles in order to receive passenger service at a reasonable
price. Why? Because no passenger carrier has been willing to invest in any of
the five non-hub airports in the Inland Empire that are currently operational.
4. Serious Threats to the Safety of Air Travelers at Overburdened Hub Airports
Strain to Shoehorn in More And More Planes The artificially inflated demand for
added capacity at hub airports has created a serious threat to the safety of air
travelers as more and more flights are shoehorned into already overburdened
facilities. The major airlines' refusal to meet demand where the demand is
generated only exacerbates safety problems at hub airports. At LAX, where
United, Southwest and American Airlines maintain dominance over the region's air
travel, safety issues remain a grave concern to the FAA and local communities.
For the past two years LAX has held the dubious distinction of being the airport
with the highest number of runway incursions, or near misses, in the nation. LAX
simply is unable to efficiently handle the volume of arriving and departing
aircraft during peak traffic periods. In fact, air traffic controllers at LAX
tower estimate that the volume of operations at that airport is so great that
they are unable to handle the load up to four hours each day resulting in
serious arrival delays. More ominous than delay is the increased risk to
passengers as well as to communities under the LAX flight path as aircraft that
are unable to land are stacked in the arrival stream for prolonged periods of
time. And in El Segundo, we are all too frequently alarmed at the sight and
sound of low-flying craft sent over our city when runway congestion forces
aborted landings. 5. Traffic Impacts Caused By Importing Passengers to Hub
Airports Hub airports have an adverse effect on ground traffic movement
throughout the five-county region of Southern California and place undue burden
on the region's infrastructure. By forcing a concentration of passengers into
hub airports, air travelers and their vehicles must pass through numerous cities
and, often, multiple counties in order to avail themselves of preferred flight
schedules and reduced fares. More than half of the passengers currently using
LAX for foreign and domestic travel live and work outside LAX's 20-mile
catchment area. And transportation professionals conclude that the irrational
concentration of air travelers flowing into the dense metropolitan area around
the hub airport will continue to compromise ground traffic movement. The
Southern California Association of Governments, our only regional transportation
planning authority, states that congested speeds on the main freeway into LAX
will continue to deteriorate in years to come. SCAG estimates that congested
speeds on the 405 Freeway currently average 18-23 miles per hour. SCAG projects
that those speeds will be reduced to 10-16 miles per hour in the next 20 years.
A significant amount of traffic adding to the congestion on the region's
highways could be eliminated, and the repair and maintenance of highways
reduced, if aviation demand were met in the county that generates the demand. At
present, and into the foreseeable future, counties will be unable to meet their
aviation demand until dominant carriers relinquish their hold on hub airports
and invest service in other airports. 6. Health Risks Associated With High
Concentrations Of Air Pollution Around Overdeveloped Airports The undue
concentration of aviation at the LAX hub has resulted in significant increases
in toxic pollution in and around Los Angeles where LAX tops the list of
pollution offenders. LAX is the single largest source of NOx emissions in the
Los Angeles Basin, ranking far above the next three biggest sources, including
oil refineries. Studies show the LAX hub's aircraft operations and vehicle
traffic generates more NOx , a critical element in the formation of ozone, than
all the MTA's public transportation buses combined. Local communities are
blanketed by toxic emissions including Benzene, Formaldehyde and particulate
matter from the more than 2000 flights per day taking off and landing at LAX.
The California Air Resources Board recently classified LAX and its proposed
expansion, aimed at curing an artificial capacity shortage, as its number one
concern relative to air quality. On-going testing and air quality studies by the
Southern California Air Quality Management District and other professionals show
that communities near LAX and under its flight path are seriously impacted by
health threatening pollution. Moreover, the greatest impacts from pollution are
disproportionately leveled upon low income communities and communities of color
resulting in significant environmental justice issues in the region. According
to preliminary environmental assessments, disbanding the hub-and-spoke airline
structure in favor of a more rational distribution of air traffic throughout the
region significantly reduces the impacts of aviation-related pollution
particularly in low income and ethnic communities. 7. Loss Of Quality Of Life In
Communities Pounded By Noise From Concentrated Aircraft Operations Aircraft
noise emanating from large hub airports imposes acute impacts on communities
under or near the flight path. Here again, a disproportionate share of the
burden is borne by low income communities and communities of color. Noise
impacts are particularly problematic near LAX where communities like El Segundo,
Inglewood, Playa del Rey and others abut the airport. Some areas are so
profoundly impacted that LAX has agreed to purchase entire neighborhoods.
Property owners in Belford and Manchester Square have petitioned airport
authorities to buy them out because noise and other airport-related impacts have
rendered those communities unlivable and have permanently and unrecoverably
depressed property values. Noise impacts are so severe that hundreds of millions
of dollars have been spent to soundproof homes and schools in the broad swath
that falls within the airport's 65-decibel noise level. While soundproofing
homes provides a partial remedy to indoor noise impacts, residents gain no
relief from relentless aircraft noise in their own back yards. More
significantly, soundproofing is a stealth tool used by large hub airports to
expand facilities and increase capacity. Where airports are able to demonstrate
that they have mitigated noise impacts in a majority of a given impact area,
that area is no longer considered to be impacted by airport-related activity
even though there has been no reduction in flights and no reduction in aircraft
noise. The artificial reduction in the airport's impact zone allows airport
growth to continue and disregards the overall quality of life in local
communities. 8. Economic Loss To Communities Ready, Willing And Able To Provide
Air Service But Who Are Locked Out Of The Hub-And-Spoke Marketplace Consistent
with the findings of the Suburban O'Hare Commission's report, the desire of
major airlines to maintain dominance in the hub market by refusing to invest
service at other airports results in an imbalance in economic gain throughout
Southern California. LAX officials state that airport-related activity generates
$61- billion annually in economic activity and creates 393,000 jobs in the
region. While we do not dispute the economic stimulus provided by airports, it
is clear that reliance on the hub airport structure deprives other parts of the
region economic opportunity that development of passenger and cargo service at
other airports would bring. The Inland Empire, with five airports available for
commercial use, lacks an economic engine to fuel a rapidly increasing population
and remedy the economic loss resulting from the local military base closures.
These airports are ready, willing and able to support substantial air commerce
activity and have the support of the local communities and leadership. Yet, the
airlines' intractable adherence to the LAX hub prevents any significant airport
activity in the Inland Empire. Without the stimulus of investment in these
airports by major carriers and the establishment of reliable flight options,
Inland Empire airports will be unable to meet the aviation demand generated
there and will suffer unfair economic loss. 9. Over-consumption Of Regional
Transportation Dollars By Hub Airports In Order To Facilitate The Hub-And-Spoke
Structure The domination of airlines in hub airports has a significant but often
overlooked impact on regional transportation funding. As hub airports
continually expand to handle more and more passengers, ground access
improvements requiring federal transportation funding are needed. Hub airport
expansion projects consume large portions of the transportation funds available
to the entire region. The proposed expansion at LAX is estimated to cost
$12-15-billion including a high-cost traffic mitigation component. In order for
LAX to handle anywhere near the 98 million annual passengers it desires, LAX
proposes a number of ground access improvements, including: - Construction of a
new freeway dedicated to airport traffic only - A dedicated ring-road around the
airport - Extension of the light rail system into the airport at and below grade
- Creation of HOV lanes on the 405-Freeway Obviously, these ground access
improvements will be costly and much of the cost for these projects will come
out of the transportation funds needed for infrastructure improvements elsewhere
in the region. The over-consumption of transportation funds for hub airport
expansion projects further impedes development of existing or emerging airports
especially in Southern California where a number of airports lie in
underdeveloped areas where transportation improvements are badly needed. Surveys
by the Southern California Association of Governments indicate that poor highway
conditions or limited highway access to outlying airports is an impediment to
passenger usage and further forces usage of hub airports. 10. The Formidable
Impediment That Dominant Airlines Present to Effective Transportation Planning
Transportation planning is an essential undertaking especially where significant
increases in population, ground traffic and air commerce are expected to occur.
Southern California, as stated previously, anticipates significant increases in
all of these areas in the next 20 years. But the refusal of major airlines to
make service investments outside the hub airport - at the other 11 existing or
potential airports available in the region - yields distortions in
transportation planning. Computer modeling and demand forecasting at the
Southern California Association of Governments demonstrates that when the hub
airport is constrained, air traffic demand easily distributes to other airports
in a rational way - demand is met where the demand is generated. But the
entrenchment of air carriers at hub airports casts a pall over efforts to
equitably distribute air traffic and forces transportation planners to
accommodate the concentration of ground access and aviation demand at the hub.
Conclusion The community of El Segundo has watched Los Angeles International
Airport evolve from a small barnstorming field where it is said farmers planted
seeds in the wheel ruts left behind by Charles Lindbergh's plane to become what
it is today - a Fortress Hub for major air carriers. As that transition took
place, my community and many others in the region have suffered the negative
impacts of the hub-and- spoke structure fostered by the airlines. While we fully
recognize the importance of a robust air commerce economy, we cannot condone the
willful disregard for the welfare of our communities, our health and our quality
of life as corporate giants tighten their grip on profits. The hub-and-spoke
structure of the deregulated airline industry stifles competition among
airlines, frustrates the goals of deregulation, and deprives consumers of the
benefits of competition. Moreover, the negative effects of the fortress hub
phenomenon, as I have demonstrated here today, ripple through local economies,
infrastructure, environments and planning processes. The inevitable spiral of
airline consolidations and the consequent reinforcement of the hub-and-spoke
structure must be stopped now by blocking the United Airlines/US Airways
merger. I respectfully urge this committee to fully examine the anti-
competitive practices in the airline industry, to consider the grave
consequences of the fortress hub phenomenon on both the national and local
level, and to recognize that the unmitigated consolidation of power through
mergers and acquisitions in the airline industry is contrary to
the principles of free trade and threatens to stunt safe, convenient and
affordable air commerce in the United States. Thank you for this opportunity to
share our views and experiences in this matter.
LOAD-DATE: June 19, 2000, Monday
