Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 14, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4227 words
HEADLINE:
TESTIMONY June 14, 2000 STEPHEN M. WOLF CHAIRMAN US AIRWAYS
GROUP, INC. SENATE JUDICIARY ANTITRUST, BUSINESS RIGHTS AND
COMPETITION AIRLINE MERGER
BODY:
Written Testimony of Stephen M. Wolf, Chairman, US Airways
Group, Inc. Presented before the Antitrust, Business Rights and Competition
Subcommittee of the Senate Judiciary Committee June 14, 2000 Chairman DeWine,
Ranking Member Kohl, and Members of the Committee, on behalf of the entire
US Airways family, I appreciate the opportunity to be here this
afternoon. The merger of United and US Airways
creates, in the words of one major financial analyst, the first airline of the
21st Century. Indeed, this event will be a milestone in commercial aviation,
joining the complementary systems and assets of two veteran and successful
carriers to create the nation's and world's most efficient and comprehensive
route network, much to the benefit of the customers and communities we serve. I
am fortunate to have been involved with this industry for over 30 years and
associated with the development of both US Airways and United
Airlines. From this perhaps unique perspective, I would like to offer a
few comments on the proposed merger. Put simply, both
organizations can take great pride in this remarkable step - and both can be
excited by what it means to the traveling public and the communities we serve.
The analyst is correct: this IS the first airline of the 21st Century. Just as
the great airlines that emerged from the onset of deregulation - the Uniteds and
Americans and Deltas and Northwests, indeed, the US Airways -
have brought the benefits of affordable air travel to millions and millions of
Americans, so will those benefits be expanded even further in the 21st Century
evolution of this system. And just as the first era of deregulation spawned new
and powerful forces such as Southwest Airlines, so too can we expect to see a
new competitive spirit emerge in the coming decades as new opportunities arise.
For US Airways, this merger promises to help us provide the
efficient, global service that our valued customers demand and deserve. I joined
what was then US Air a little over four years ago. At that time, I pondered
whether or not there was a place in U.S. commercial aviation for a mid-sized,
mature-cost carrier, recognizing that we were unique in our position. The
industry was made up of many successful, incumbent carriers - American, Delta,
Northwest and United. The balance of the mid-sized, mature-cost carriers had
disappeared, those being Braniff, Eastern, and Pan American. Then, there were an
array of low-cost carriers, such as Southwest, which operated with a
significantly lower cost structure and a product that focused on point-to-point
service. Finally, there were the in-between carriers that were generally
size-peers of ours, including TWA and Continental. But these carriers had
substantially reduced their cost structure as a result of a series of bankruptcy
filings. US Air was none of the above. In this difficult business environment,
we committed to a five- point strategic plan to restore financial stability to
our company that would ultimately lead to our becoming the Carrier of Choice.
Together, with the dedicated and hard-working employees of US
Airways, we have made enormous strides in transforming the airline and
have been successful in attaining our goals. We have made spectacular
improvements in our operational performance, established harmonious labor
agreements, begun fleet modernization and expanded our international service.
What goal remains? We are determined to become a world-class, global carrier,
that provides our customers with efficient, worldwide service. To take the next
critical step in this five-point strategy requires access to transcontinental
and international markets. But we are a mid-sized, high-cost player in an
industry characterized by extremely vigorous competition. With deregulation and
the subsequent emergence of small, low-cost regional airlines as well as the
growth of global alliances, it has become increasingly challenging for us to
maintain our competitive edge and remain profitable. In this environment, we can
only go so far if we go it alone. To expand into the global market and to
realize our full potential, we have to join with a partner that has a more
extensive scope, breadth and reach. With a route network that primarily
complements ours, United Airlines is that ideal partner. With
this union, US Airways has the opportunity to achieve our goal
of building a truly global carrier - not over many years, but in a single
stroke. Without it, we would face tremendous hurdles in striving to offer the
kind of convenience and worldwide service that our customers both deserve and
expect in this competitive era. For the US Airways family - our
employees, our customers and the communities we serve - we are obligated to do
the right thing. And this is it: the right step, with the right partner at the
right time. What makes this so right? First, the combination is a superb fit
that enhances competition and benefits customers. This is an agreement that
works on many levels and is one in which the consumer benefits of the combined
carriers will be substantially greater than their individual parts. Where there
was the potential for overlap between the two carriers - primarily in the
Washington area - we have eliminated that potential conflict by divestiture. In
contrast to many mergers whose benefits are often measured in
the synergies of eliminating duplicative jobs and functions, this is a
merger whose benefits truly flow from the growth that will
occur. United's extensive east-west system and western presence nicely
complement US Airways' comprehensive north-south routes and
eastern presence. Historically, both US Airways and United are
known for their high level of service and for the professionalism of their
employees. Our employee unions are similar. And we each have, in large part, the
same type of aircraft - all major considerations. For the thousands of dedicated
and loyal men and women in our workforce, this agreement promises a bright
future. For nearly a decade, the employees of US Airways have
faced periods of uncertainty about the future of the company. Now they will be
part of the most exciting development in commercial aviation history, and they
will see their career opportunities, and their security, increase.
United Airlines agreed that, given the
complementary networks and benefits of the combined carrier, they could absorb
these employees without the need for layoffs and furloughs. Indeed, given the
strong projections in leisure and business travel, the new partnership actually
expects to employ more people rather than fewer in the foreseeable future. For
millions of our customers, this merger will deliver immediate
benefits, while simultaneously building a foundation for future opportunities.
This step is both pro-consumer and pro- competitive. In today s global economy,
more people are flying to more places than ever before; and this
merger is a natural step to meet that demand. Partnered with
United, we will be able to provide our customers with an unparalleled array of
on-line destinations. Our passengers will gain new non-stop, same-carrier
service to 117 U.S. cities and 28 international destinations. Our loyal and
frequent customers, many of whom live in small and medium-size cities throughout
the eastern United States, will gain instant access to over 500 additional
destinations in every corner of the globe through the Star Alliance. This means
that millions of our customers will be linked to a system that will directly
carry them to commercial centers around the globe. On the combined US
Airways and United system, for instance, travelers will be able to fly
from such places as Frankfort, Kentucky to Frankfurt, Germany, and from
Pittsburgh, Pennsylvania to Silicon Valley with never-before-available ease and
convenience. After the merger, more passengers will enjoy the
convenience of one airline, one baggage check-in and one frequent flyer program.
For the US Airways family of communities, this agreement will
bring home significant benefits. We will bring the world to the doorsteps of
hundreds of communities by providing easier access to international
destinations. Many of the mid-size cities we serve - such as Charleston,
Rochester, and Tampa - will gain seamless access to international destinations.
Our hub in Charlotte, for example, will gain new non-stop service to several
West Coast destinations, and one-stop service to new destinations such as
Hawaii, Australia, New Zealand, Korea and Taiwan, as well as to Caracas, Rio de
Janeiro, Sao Paulo, Buenos Aires and Santiago. In addition, dozens of
communities in the eastern United States will have enhanced commercial and
tourism opportunities with new, convenient access to numerous Asian
destinations. By gaining convenient access to international destinations, these
communities will see traffic multiply and business opportunities flourish. They
will strengthen their ability to attract international investments, as well as
domestic business and tourism. And US Airways hub cities in
Pittsburgh, Philadelphia and Charlotte will be better able to compete with other
carriers East Coast hubs and international gateways. This combination will also
give rise to a new level of competitiveness - in an industry where competition
is already thriving. The number of airlines in this country is on the increase,
not the decrease. This is true both in domestic and international markets. In
the Eastern United States alone, regional and low-cost carriers like Southwest,
Delta Express, AirTran and JetBlue have transformed the landscape and
significantly expanded consumer choice. All signs indicate that this trend is
likely to continue; the merger of US Airways and United will
not interrupt it, but will augment it. We will spark growth industry-wide,
starting with the creation of new competitive avenues and service options. And
as an important part of this transaction, certain current US
Airways assets will be transferred to a new airline - DC Air - that
will inject fresh competition into the Washington, DC marketplace. DC Air will
be a Washington-based airline committed to offering high-quality,
cost-competitive service to consumers and businesses in this region. It will be
a major competitive force at Washington s Reagan National Airport, with more
than 100 flights daily to 43 destinations. It also will be the nation s largest
minority-owned airline and will bring about the most significant pro-competitive
change since slot controls were initiated at Washington National in 1968. I have
spoken today primarily in my capacity as Chairman of US
Airways, and it is natural that my testimony be viewed as
representative of the interests of my company. And indeed, I speak first and
foremost for the airline that I have helped to lead for the past four years. But
I am also here today to address the future of an even larger community - the
commercial aviation industry. I have spent a professional lifetime in this
industry. Over the past three decades, my career has taken me from American
Airlines to Pan American World Airways to Continental, Republic, Flying Tigers,
United and finally US Airways and I bring all of my aviation
experience to bear on my testimony here today. For these thirty years, I have
watched the era of deregulation, the expansion of regional service and the
impact of globalization create a revolution in the airline industry. The
combination of these two carriers is both the most positive response to these
new market forces and a proactive step into the next generation of flight. But
the impact of this merger transcends the immediate; it is a
major milestone in aviation history. By helping to generate new competition, it
will establish a new era in the industry. It will further and enhance America s
leadership in the global aviation market. As we move into the second century of
flight, the international marketplace is undergoing a radical transformation.
The world has never been more interconnected than it is today. The combination
of technology and free-market principles has led to the free-flow of goods,
services and information across national borders. Travelers from all four
corners of the country need to be able to travel throughout the country and
throughout the world quickly and efficiently. By combining the strengths of
these two companies, we will have our first truly nationwide network that is
linked to the world. With this partnership, we can further facilitate the flow
of international commerce. This is especially exciting for many of the eastern
communities that have been served by US Airways for as many as
50 years or more. These communities will not be left behind; they will become
full-scale participants in the new global economy. The legal framework is also
evolving to adapt to the changing marketplace. Fragmented protectionist
bilateral agreements are rapidly being replaced by open skies and liberalized
regimes on a bilateral and even multilateral basis. Eventually, multilateral
regimes will emerge. The United States now has taken the lead in opening the
international skies. Now the market place is responding to the opportunity
created through U. S. government bipartisan leadership. When the U.S.
deregulated the domestic airline industry more than 20 years ago, we freed the
industry to respond more efficiently to the ever-evolving needs of customers. At
the same time, we enabled U.S. airlines to demonstrate to the world the benefits
that come from a deregulated marketplace. During the past two decades, consumers
have enjoyed improved efficiencies, services and price options. Through this
merger, U.S. airlines once again can demonstrate the consumer
benefits of a more open marketplace - this time on a global scale. At the same
time, this agreement will completely fulfill the promise of domestic
deregulation by enabling more American air travelers to more fully enjoy a
global network of seamless service and the benefits of open competition. But it
is not just domestic consumer demand to which we must respond in order to
thrive. We must remain competitive, in a rapidly changing international
environment. Multi-national carriers in Europe and Asia are responding to the
new marketplace opportunities. The greater efficiencies resulting from this
merger will improve services and bring down prices, thus
enhancing global competitiveness. The new merged airline is positioned to
compete head to head with the leading carriers of Europe and Asia, as these
airlines are undergoing a similar transformation - although at a slower pace.
Allowing U. S. customers to respond to the new global market, we can bolster the
world leadership of our industry. This merger is an important
step in doing so. For our nation to continue to lead this industry on an
international scale, we must also have the vision to see beyond the historical
constraints of a fragmented aviation system. We must recognize that an open,
global marketplace is inevitable and the aviation industry will be no exception.
Now in the rapidly changing legal and economic environment of the world, our
industry must continually evolve to meet consumer demand. This union provides
the ideal free-market response to this rising consumer demand for international
air travel. It reflects the needs of an increasingly interconnected global
marketplace. Such an airline is well-positioned to extend the benefits of
deregulation to the emerging global marketplace. The benefits of the union will
be substantial domestically as well as internationally. A merger of US
Airways and United will have clear and dramatic positive effects on
competition in domestic markets. Both the economy and consumers will reap the
benefits of this enhanced competition and improved service. For the US
Airways family - from our employees to the communities we serve - this
partnership will create a host of new opportunities. Our customers, too, will
enjoy substantial benefits, including easier-than-ever access to the world. For
all involved, the benefits that will arise with this new airline are
significant. Thank you for the opportunity to share my perspective with you.
LOAD-DATE: June 21, 2000, Wednesday
