LEXIS-NEXIS® Congressional Universe-Document

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

Document 75 of 110.

June 14, 2000, Wednesday

SECTION: PREPARED TESTIMONY

LENGTH: 1039 words

HEADLINE: PREPARED TESTIMONY OF SENATOR CHARLES SCHUMER

BEFORE THE SENATE JUDICIARY COMMITTEE SUBCOMMITTEE ON ANTITRUST, BUSINESS RIGHTS, AND COMPETITION

BODY:
Mr. Chairman, thank you for holding this hearing on the proposed merger of US Airways and United Airlines. This issue is vital to New York, which due to the heavy local presence of US Airways, will be highly affected by.the proposed merger.

The merger represents both an opportunity and a danger for Upstate New York. And I intend to fight to make it an opportunity. I plan to be very aggressive in ensuring that airline competition in Upstate New York continues to grow, not decline, under this or any future merger. My general view is that in an economy that is based on free market principles, the government should generally tread cautiously when its actions -- such as disapproving an airline merger -- have a major impact on an industry sector. At the same time, free markets must involve competition. And a true test of whether this merger should be approved as is, altered, or rejected is whether .the result would ensure competition for consumers and businesses. For me, the key question is whether such a merger would have a negative impact on regional air service, particularly in Upstate New York, where US Airways currently dominates the market and, by most people's accounts, has served them poorly.

According to local airport authorities, US Airways currently controls 38 percent of the air travel market in Albany, 39 percent in Buffalo, 43 percent in Rochester, and 40 percent in Syracuse. United Airlines represents 9 percent of the service in Buffalo, 15 percent in Rochester, 8 percent in Syracuse, and 9 percent in Albany. So a new, merged airline would control roughly 50 percent of the market in each of New York's major Upstate cities. And in Binghamton, the new airline would control a staggering 90 percent of the market.

These cities are already saddled with some of the highest airfares in the country. Today, the average price of a round trip US Airways ticket from Washington to Albany costs a whopping $430, the price is $342 to Buffalo, $398 to Syracuse, and $358 to Rochester.

And the walk-up fares that many business travelers purchase are off the charts! The price of a roundtrip walk up fare on US Airways from Washington National to both Albany and Buffalo is an exorbitant $758, Rochester is $692, and Syracuse is $792.

And I am concerned that this proposed merger may make a bad situation even worse in Upstate. I believe the merger agreement, as it is currently proposed, could lead to even higher fares and poorer service to the Upstate New York cities of Albany, Buffalo, Rochester and Syracuse. Smaller cities like Utica, Binghamton, Elmira, and Jamestown could also face fare increases and reduced service.

For example, under the merger, I understand daily flights from Dulles International Airport to Albany could be cut from 9 to 6, to Buffalo from 11 to 8, to Rochester from 11 to 7, and to Syracuse from 9 to 6. While the number of DC Air flights from National to Upstate New York could stay the same under the current plan, I understand the available seats could be reduced by more than half because DC Air will use 50- seat regional jets instead of the typical 112-seat or 142-seat jets currently used by US Airways.

I have the highest respect for DC Air's new CEO, Robert Johnson, who is, without dispute a highly successful and public-spirited entrepreneur, and 1 look forward to working with him. Let me say up front that I have been a longstanding critic of US Airways' high prices and poor service and I welcome efforts to do better.

I fear that DC Air may not have a cost structure that enables it to provide tmc low-cost service. The new carrier plans to use regional jets, which can have higher per passenger operating costs than larger jets. The practice of wet leasing equipment and other services from outside high-cost carriers, as DC Air proposes to do, can also add additional base operating costs.

And I share the concerns that many have already voiced about the specifics of the proposal to grant DC Air 222 of US Airways' extremely valuable takeoff and landing slots from National Airport. Those slots represent as much as a quarter to a third of National's total slot inventory and, while United is now proposing to sell them, I believe they are truly are a public asset.

I am sympathetic to the argument that DC Air, Air Tran, and other new entrant and low-cost carriers have made that, in order to compete with the majors at National, they need a critical mass of slots. I agree that perhaps DOT's traditional method of doling out just a few slots at a time to a diverse bunch of small undercapitalized carriers, only to see nearly all of them fail, may not be the best way to foster real competition.

In fact, JetBlue, New York's new low-cost cartier, persuaded me and others that they needed a large number of slots in New York to effectively serve Upstate and connect it to other major markets. That was why I fought so hard to convince DOT to grant JetBlue an unprecedented 75 slots at Kennedy Airport in exchange for the carrier's promise to serve Buffalo, Rochester and Syracuse. And I am happy to report that so far JetBlue has delivered on its promise of low-cost, high-quality service to the consumers and businesses of Buffalo, with Rochester to follow this summer!

I want to follow that successful model of JetBlue in this merger and want whatever carrier receives those slots at National, which are worth their weight in gold, to guarantee that they will provide competitive service out of National Airport to Albany, Buffalo, Rochester and Syracuse.

I also hope DOJ and DOT will take this opportunity to look at the broader question of airline competition and especially how mid- and smaller-sized cities like Albany, Burlington, Dayton, and Charleston are being left behind. While that broader issue may, in part, transcend the particulars of this merger, it should be central to DOJ's and DOT's deliberations and proposed solutions, especially in the evaluation of potential market concentration at National Airport.

Mr. Chairman, thank you again for holding this hearing and I look forward to working with the Committee, the Airlines, and the Administration during this important process.

END

LOAD-DATE: June 16, 2000

Document 75 of 110.


Search Terms: United Airlines AND U.S. Airways AND Merger, House or Senate or Joint
To narrow your search, please enter a word or phrase: