Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 23, 2000, Friday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4040 words
HEADLINE:
TESTIMONY June 23, 2000 ROBERT L. JOHNSON CHAIRMAN AND CEO DC AIR
HOUSE JUDICIARY AIRLINE HUBS, UNITED US AIR
MERGER
BODY:
June 23, 2000
Testimony by Robert L. Johnson Presented to the Committee on the Judiciary
United States House of Representatives Mr. Chairman, Congressman Conyers, and
Members of the Committee, my name is Robert Johnson. I am founder and Chief
Executive Officer of BET Holdings, Inc., a multi-media company whose principal
business is the operations of the BET Cable Network, a 24-hour basic cable
programming service that reaches 60 million cable households. From an initial
investment of $500,000 by Tele-Communications, Inc. in 1980, BET Holdings
celebrates its 20'h Anniversary with a market capitalization of approximately
$2.5 billion dollars and is the preeminent business serving the entertainment
and information needs of African Americans. The recently announced acquisition
of US Airways by United Airlines has created
for me another historic and exciting opportunity. I have agreed to purchase
certain assets currently operated by US Airways out of Reagan
National Airport and will be launching DC Air. I do so not to create an African
American owned airline, though it will be that. I do so not just to make sure
that air transportation remains competitive, though I will do that. Rather, I do
so to build a great and successful company that I believe with all my heart will
benefit the Washington area, offer high quality service and value to passengers
traveling to and from DC, and make us all proud that "our airline" is the best
to fly. My vision for DC Air is straightforward: - to build on the
well-established East Coast service from Washington's National Airport that
Washington-area passengers have come to rely on; - to provide safe, reliable,
high-quality service, at competitive prices to customers and communities in this
area; - to compete vigorously on price and service in the markets we serve; to
facilitate the growth and economic development that accompanies air service; and
- to develop and maintain an airline that the Washington community will be proud
to call its hometown carrier. In terms of its development and its creation, DC
Air is a product of the United/US Airways merger, and that is
great news for consumers. Why? The creation of a new airline is no small task in
this intensely competitive industry. New entrant carriers face numerous
obstacles such as high, fixed start-up costs, the lack of a strong identity, and
an unproven route structure and business plan. DC Air, however, is not a typical
airline startup company. Benefiting from the experience and expertise of United
and US Airways personnel, we intend to build upon a proven
network anchored at Washington's National Airport. DC Air will be a viable and
totally independent competitor from Day One. At the same time, it will avoid the
mistakes and pitfalls that often confront and, in many cases, overwhehm new
entrant carriers in this industry. DC Air will be the largest carrier (measured
by number of departures) at Washington's premier, close-in airport, offering I I
I daily departures, flown by 37 aircraft, serving 43 airports, extending as far
as Maine, Florida, and Kansas City. And as DC Air develops, we will assess
opportunities to expand service to additional communities. For over several
decades in some cases, great American cities like Albany, Allentown, Birmingham,
Buffalo, Burlington, Charleston, Columbia, Greensboro, Greenville, Huntsville,
Knoxville, Lewisburg, Manchester, Morgantown, Norfolk, Roanoke, Rochester and
Syracuse, among others, have enjoyed nonstop air service to the heart of the
nation's capital. These communities have relied upon this extensive service
network, which has provided significant commercial, trade, economic development,
and governmental relations benefits for these important cities. The network has
been maintained during periods of economic growth and recession, during harsh
winters and humid Washington summers. Sustained service to many of these cities
is made possible by the efficiency of a network that is centered at the
beautifully renovated, convenient Ronald Reagan Washington National Airport. DC
Air is fully committed to sustaining and enhancing this network of service that
links these critical American cities to our nation's capital. As a new entrant,
DC Air will provide frequent, competitively priced air service, ultimately with
an all-jet fleet. Retaining the synergies of the current route system is
absolutely vital to ensure the important access for these communities to
Washington, D.C. History clearly shows that as air carriers acquire the coveted,
valued slots at Washington National, they use those slots in the most profitable
way - in service to their hometown hub cities. In fact, excluding US
Airways, the principal U.S. carriers serving National Airport only do
so from their hubs or focus cities: America West from its hub in Columbus, Ohio;
American from its hubs and international gateways in Chicago-O'Hare, Dallas, New
York-JFK, and Miami; Continental from its hubs in Cleveland, Newark, and
Houston; Delta from its hubs in Atlanta, Cincinnati, and Dallas, its New
York-JFK international gateway, and its Delta Shuttle cities, New York-LaGuardia
and Boston; Northwest from its hubs in Detroit, Memphis and Minneapolis; TWA
from its hub in St. Louis and its New York-JFK international gateway; and United
from its hub in Chicago O'Hare and its Miami international gateway. Only
US Airways, the current hometown, Washington-based carrier,
offers breadth of service to the Washington passenger, serving not just its hubs
in Charlotte, Philadelphia and Pittsburgh, but also 46 additional communities
each day. That is why the creation of the hometown D.C. carrier is so critical
to the preservation of a route system that has served medium and small cities
throughout the eastern United States for so many decades. That is why the
merger proposal reflects the strong conviction of each of the
three principal players that not only must competition be preserved in the D.C.
metropolitan area, but that new competition must come in the form of a carrier
able, willing, and completely dedicated to preserving and enhancing the existing
network of service upon which the citizens of so many of these cities have come
to rely. The prospects for vigorous new competition and improved quality of
service to these communities are boundless. DC Air is up to the challenge and is
eager to assume the historic commitment to these great American communities by
providing safe, reliable, high-quality service with outstanding employees. I
appreciate that the airline industry is unique in many ways, and I further
appreciate that the industry is highly unionized. I welcome all employees -
whether union or non-union - to the DC Air family. My plan is to provide fully
competitive compensation and benefits packages, while fostering an environment
of participation and common goals for all our employees. This plan, I believe,
will result in high job satisfaction among DC Air employees, which, in turn,
will translate into the top-quality service our passengers should expect and
demand. Startup of Operations To assist in shaping and realizing the vision of
DC Air, Bruce Ashby has been named acting President of DC Air. Bruce has 14
years of airline experience, most recently with US Airways,
where he held the position of senior vice president - corporate development.
Prior to that, he held the positions of senior vice president - planning and
vice president - financial planning and analysis. Before joining US
Airways in April 1996, he held corporate officer positions at Delta Air
Lines, where he was vice president of marketing development, and at
United Airlines, where he was vice president of financial
planning and analysis and vice president & treasurer. Bruce played a key
role in the formation of three "airline-within-an- airline" units: MetroJet by
US Airways, Delta Express, and Shuttle by United, all of which
were successfully launched and grown by these respective carriers, and continue
to operate today. Bruce's broad background at a senior management level in the
areas of airline finance, planning, marketing, operations, and labor
negotiations will prove invaluable to DC Air. As I mentioned earlier, unlike a
typical airline startup, which might begin with one or two airplanes flying one
or two routes, DC Air will be a fully operational airline serving 43 communities
from National Airport with I I 1 daily departures. This plan brings important
consumer benefits, by providing nonstop service and a new, competitive force to
the 43 communities that we plan to serve, 36 of which are served from
Washington's Dulles airport as well. To enable this level of startup, DC Air has
entered into a memorandum of understanding with United
Airlines, as part of the proposed United-US Airways
merger, that will provide DC Air, from Day One, with the hard assets it
requires to mount its operations. These include 222 departure and arrival slots
at Washington National Airport; necessary gates and related airport facilities,
for which DC Air will assume the leases; and the operations of one of its
commuter airline subsidiaries, including the management staff, turboprop
aircraft, and related assets. In addition, during a brief transition period in
which DC Air will build its own fleet, United will ensure near-term aircraft
availability through customary contractual "wet-lease" relationships for up to
ten B-737-200 aircraft and up to 19 regional jet aircraft. In short, DC Air will
have the necessary people, aircraft, and airport rights and facilities from Day
One. In addition to the Day One hard assets, United has agreed in the memorandum
of understanding to provide DC Air, if DC Air so requests, with certain
supporting services at market rates. These services are typically purchased by
airlines, and include items such as fuel, occasional use gate agreements,
station-handling contracts, and standard industry interline ticketing and
baggage agreements. DC Air is free to purchase any and all of these services on
the open market from the numerous other providers of such services. It is
critical to appreciate that none of these understandings compromises DC Air's
independence. We are rapidly moving through the process of turning the vision of
DC Air into an operating reality. We have begun discussions with aircraft
manufacturers in order to build our long-term a11-j et fleet of aircraft. We are
drafting the definitive documentation with United Airlines to
implement our memorandum of understanding. We will soon be entering into
detailed discussions with the DOT and FAA to obtain the required permits and
certificates. And, we are engaged in working with the federal, state and local
governments and community leaders to ensure that their needs are met. In
addition, we are ready to begin discussions with other major airlines, such as
American, Delta, Continental and Northwest, to seek out partnering opportunities
such as code- sharing and frequent flyer arrangements. We see these as
beneficial to our passengers, who would thus be able to earn frequent flyer
miles in these other major airline programs while flying DC Air. We believe our
service at National Airport will be perceived by these carriers as a desirable
feature of their extended networks. Service DC Air's initial aircraft fleet will
be composed of turboprop aircraft operated by DC Air employees, plus 19 regional
jets obtained through an industry contractual relationship with current
US Airways affiliates and IO Boeing 73 7-200s obtained through
a wet-lease arrangement with United Airlines. Currently, the
markets that DC Air will serve are flown by US Airways with 34%
turboprop departures and 66% jet departures. Of the I I I daily departures to be
flown by DC Air, 25% will be turboprops and 75%jet departures. We will move to
an all-jet fleet of aircraft over the first few years of operation; ultimately
100% of DC Air's service will be flown by jets. DC Air intends to retain service
to the communities it serves. One of the key benefits that comes to the
communities we serve is that we are purchasing from United all of the slots
required to serve these communities. Were the slots to be divided up among
several larger carriers, none of these carriers would have sufficient slots to
serve all the communities and each would naturally tend to add service to
high-volume markets, such as hubs and focus cities where they already have a
significant presence. Conversely, DC Air is committed to continuing service to
all of our mid-size and smaller communities, and its sole focus is on serving
these communities with the highest quality operation. Access by these 43 cities
to the heart of the nation's capital will be assured. Competition DC Air will
provide Day One competition to the Washington, DC area, with competitive pricing
and high-quality service. DC Air will offer nonstop competition to larger
incumbent carriers from National Airport in eight of its 43 markets: Atlanta,
Georgia; Charlotte and Raleigh-Durham, North Carolina; Columbus, Ohio; Detroit,
Michigan; Ft. Lauderdale, Florida; and Philadelphia and Pittsburgh,
Pennsylvania. These constitute 22 of its I I 1 daily departures, or 19%. All
eight of these markets are also served from Washington's Dulles airport. In
addition, DC Air will compete in 28 markets with service currently offered from
Dulles Airport: Albany, Buffalo, Rochester, Syracuse and White Plains, New York;
Allentown, Pennsylvania; Hartford, Connecticut; Burlington, Vermont; Charleston,
Columbia and Greenville, South Carolina; Greensboro, North Carolina; Charleston,
West Virginia; Dayton, Ohio; Indianapolis, Indiana; Kansas City, Missouri;
Nashville and Knoxville, Tennessee; Louisville, Kentucky; New Orleans,
Louisiana; Norfolk, Richmond and Roanoke, Virginia; Portland, Maine- Providence,
Rhode Island; and Jacksonville, Orlando, and Tampa, Florida. These constitute 70
of its 1 1 1 daily departures, or 63%. In seven of its markets, DC Air will face
no direct competition at National or Dulles airports. These include two
designated Essential Air Service markets (Lewisburg and Morgantown, West
Virginia), as well as Birmingham and Huntsville, Alabama; Little Rock, Arkansas;
Manchester, New Hampshire; and West Palm Beach, Florida. Washington's National
Airport represents the only nonstop link for these communities to the nation's
capital. Summary DC Air is an airline that works. It works for our customers,
who will receive top-quality service at competitive prices between Washington's
premier airport and the forty-three other cities we plan to serve. It works for
our many mid-size and small communities, because it will retain nonstop service
to National from those communities that otherwise would likely be converted to
connecting service over another carrier's hub. It works for our employees, who
will enjoy the benefits of working for a competition-focused, all-j et carrier
with a clearly defined mission. And it ensures that airline competition will
grow and thrive here in Washington.
LOAD-DATE: July 11,
2000, Tuesday 
