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Search Terms: United Airlines AND U.S. Airways AND Merger, House or Senate or Joint

Document 59 of 110.

June 15, 2000, Thursday

SECTION: PREPARED TESTIMONY

LENGTH: 1204 words

HEADLINE: PREPARED TESTIMONY OF MIKE FISHER ATTORNEY GENERAL COMMONWEALTH OF PENNSYLVANIA

BEFORE THE HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

BODY:
Congressman Shuster, Congressman Oberstar and other member of the Transportation and Infrastructure Committee:

Thank you for the opportunity to address you about the acquisition of USAirways by United Airlines. This acquisition is of particular interest to us in Pennsylvania since USAirways operates hubs in Philadelphia and Pittsburgh and for years has had its major base of operations in Pittsburgh. In fact, USAirways is the largest employer in the Greater Pittsburgh area with more than 15,000 employees. Its employment far exceeds that of the steel industry which Pittsburgh is most famous for. USAirways is also a major employer in the Philadelphia area with approximately 5,000 employees there. My Office has authority under the federal antitrust laws to bring actions to stop mergers as parens patriae to protect our consumers and businesses. In addition, we have our own proprietary interest to protect. Pennsylvania's government agencies are large purchasers of airline travel. I want to address the process our Office will use to review this merger, the nature of the concerns I have with the merger and the overall impact of quality, cost-effective air travel on our economy. Pennsylvania was one of the first states to actively review and ultimately challenge a large national merger. In 1987, the Commonwealth, along with Allegheny County and the City of Pittsburgh sued to block the merger of the May Company and Associated Drug Goods, a merger which would have resulted in the consolidation of Pittsburgh's only two traditional department stores. We successfully settled that case and to this date, competition among department stores in Pittsburgh has been preserved. In 1990, the Supreme Court upheld the ability of state attorneys general to challenge mergers in the case of California versus American Stores. Both the Pennsylvania and California cases were brought without cooperation of the federal antitrust authorities. Since then, both the United States Department of Justice and the Federal Trade Commission have established procedures for joint reviews of mergers. These joint reviews have benefits for all concerned. The states have gotten the benefit of the federal authority's vast experience in merger enforcement. The federal government has received the states' insights and expertise into their local markets. And both sides have been able to share resources in reviewing what, at times, seem like a never ending onslaught of mergers over the past several years. Even for the merging parties, this cooperation has been beneficial. Usually they face only one review process and simply provide a duplicate of the information provided to the federal government. While I am sure that no merger partners relish the thought of being told by both the federal government and one or more state governments that they will sue to block a merger, even in that situation, they are better off than litigating the legality of the merger two or more times.

That brings me to this merger. My office will be working closely with the United States Department of Justice to review the merger. We, along with Attorney General Spitzer of New York, will be coordinating the states' review. We are confident that we will reach the appropriate agreements with the parties that will allow for such a joint review.

I have said, as have my colleagues in several other states, the merger of USAirways and United Airlines causes us concern. Part of that concern arises il:om the sheer size of this transaction. United is the country's largest airline. USAirways is the sixth largest. Moreover, despite the popular generalization that USAirways is a north-south airline and United is an east-west airline, United offers connecting service to cities in Florida through its Dulles hub from the cities it serves in Pennsylvania. USAirways has been proudly advertising the fact that it has increased its flights to the West Coast from both Philadelphia and Pittsburgh. Thus, at first blush, these two airlines appear to compete for business in Pennsylvania.

In addition to Philadelphia and Pittsburgh, both airlines serve smaller Pennsylvania airports such as Harrisburg, Lehigh Valley, Scranton and State College. One of our primary concerns is the effect of this merger on service to these smaller Pennsylvania airports and on fares. In Pennsylvania and throughout the Northeast, the cost of intrastate and intra-region travel is often prohibitive. For example, if I wanted to fly round trip from Harrisburg to Pittsburgh tomorrow, it would cost me about $550. If I wanted to fly from Miami to Orlando tomorrow, a route about the same distance as Harrisburg-Pittsburgh, it would cost me $263. The Florida route is served by four airlines. The Pennsylvania route, only one. Flying from Harrisburg to Boston tomorrow would cost more than $800. That route is served by United and US Airways. Previously, it had been served by Continental which canceled its flights after it started its joint venture with Northwest. Although it was expensive then, it was not as expensive as that route is now. These are just two of many examples of very high prices consumers face in Pennsylvania, New York and the other Northeastern States for short distance travel. The question we will be trying to answer over the coming weeks is whether the loss of competition between these two airlines will result in even higher fares or result in the loss of the potential for United to expand its service in the Northeast. After we have completed our review, we will determine whether the merger of the two airlines will substantially lessen competition or tend to create a monopoly as prohibited by the antitrust laws.

Finally, I would like to come back to a comment I made at the beginning of my testimony. At the turn of the last century, steel was the biggest employer in Pittsburgh. Now it is an airline. In Philadelphia, USAirways has made its hub operation there a major international gateway to Europe -- a fact that benefits not only passengers but also shippers who want to send cargo to or from Europe. The airline business is important to communities like Pittsburgh and Philadelphia, not only because of the employment it brings to the community, but also because of the impact access to quality/cost effective airline service can bring to a community. I have to admit that many in Pennsylvania look with envy at BWI in neighboring Maryland. Since Southwest entered that airport, the reduction of airfares from BWI has been a boon to the airport, the surrounding hotels and restaurants. More importantly, BWI's low fares and plentiful flights have made the Baltimore/Washington corridor a very attractive place for businesses to locate.

There are many parts of Pennsylvania, Altoona/Johnstown, Scranton, Erie, State College and Harrisburg, as well as Philadelphia and Pittsburgh, that would become more attractive for businesses to locate if they had better airline services and better prices. One of our concerns with this merger will be in trying to determine whether it will make such service a reality for those communities.

Thank you for your time today. I will be happy to answer any questions.

END

LOAD-DATE: June 21, 2000

Document 59 of 110.


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