Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 21, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3760 words
HEADLINE:
TESTIMONY June 21, 2000 ROBERT L.JOHNSON CHAIRMAN AND CEO DC AIR
SENATE COMMERCE, SCIENCE AND TRANSPORTATION UNITED
AIRLINES-U.S. AIRWAYS MERGER
BODY:
TESTIMONY BY ROBERT L. JOHNSON CHAIRMAN AND CEO DC AIR JUNE 21, 2000 Mr.
Chairman, Senator Hollings, 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 20th 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 "ourairline" 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/(JS 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, overwhelm 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 111 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 111 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-73 7-200 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 all- jet
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 1 0 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 111 daily departures to be flown by DC Air, 25% will be turbo
props 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 111 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 111 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.
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