WEDNESDAY, JULY 26, 2000
FOR IMMEDIATE RELEASE
CONTACT:
PIA PIALORSI 202-224-2670
CYNTHIA BERGMAN 202-224-3401

McCAIN, GORTON ISSUE STATEMENT ON UNITED -
US AIRWAYS MERGER

WASHINGTON, D.C. -- Senator John McCain (R-AZ), Chairman of the Committee on Commerce, Science, and Transportation, and Senator Slade Gorton (R-WA), Chairman of the Aviation Subcommittee, expressed their strong reservations about the proposed merger of United Airlines and US Airways in the following statement about a resolution of disapproval they introduced today in the Senate:

"I am pleased to be joined by the Commerce Committee Aviation Subcommittee Chairman, Senator Gorton, to introduce a Senate resolution expressing our strong reservations about the proposed merger of United Airlines and US Airways.

"Through Commerce Committee deliberations, Senator Gorton and I have carefully analyzed the proposed merger, as well as its long-term consumer effects. We conclude that whatever air travelers stand to gain from the merger is outweighed by what they stand to lose.

"The public interest would likely be harmed by a United Airlines-US Airways merger. First, almost all analysts agree that the merger would trigger additional consolidation in the airline industry. The six largest hub-and-spoke carriers in the country would likely become the ‘big three.' Everything else being equal, basic economic principles suggest that consumers are better served by having six competitors in a market rather than three.

"Even at this preliminary date, our experience bears out the prediction of additional industry consolidation. American Airlines has already made an offer for Northwest Airlines. Delta Air Lines and Continental have reportedly engaged in merger negotiations.

"Consolidation among these network carriers poses additional problems for the flying public. The likely result of fewer carriers is more single-carrier concentration at hub airports across the country. Studies by the Department of Transportation, the General Accounting Office, and others consistently conclude that air fares are relatively higher at hub airports ‘dominated' by a single carrier.

"Important new entry in the airline industry would be hurt by consolidation among the major airlines. The mega-carriers would have additional resources to engage in fierce and prolonged behavior designed to drive new competitors out of the market, and to signal potential entrants that they dare not compete with the incumbent.

"Today, many new entrants simply choose not to enter the major airlines' hub markets because they fear they cannot survive a sustained head-to-head battle. A United-US Airways merger, and the consolidation that would ensue, would further entrench the incumbent air carriers' positions.

"I admit that there are benefits associated with the proposed United-US Airways merger. The carriers, for instance, tout ‘seamless' connections to international destinations, an expanded frequent flyer program, and similar benefits that should appeal to travelers on the United-US Airways system.

"United and US Airways also applaud new service to a multitude of destinations as a consequence of the merger. It is important to note, however, that what is new to United is not exactly new to the flying public, since United's ‘new' service is made up of flights that are now offered by US Airways.

"Again, the point is that the anti-competitive harm posed by the proposed United-US Airways merger outweighs its benefits. And that conclusion does not even take into account the customer service problems associated with integrating the work forces of two or more major airlines.

"I want to underscore that this resolution is designed to express our concerns about the proposed United-US Airways merger. It does not seek to force any federal agency or department to take any specific action with respect to the proposed merger. However, our concerns for the consumer are of such a significant nature that we are compelled to introduce this resolution.

"I would like to insert into the record a letter from the ‘father' of airline deregulation, Professor Alfred Kahn. His letter outlines his preliminary concerns with the proposed United-US Airways merger.

"I want to highlight one point that Professor Kahn makes. He asserts that United's main justification for the merger is the need for a hub in the northeast. He goes on to question, however, why United doesn't create a hub in the northeast, rather than follow the path of ‘least competitive resistance' by trying to acquire on its competitors' hubs. I ask the same question, and urge my colleagues to join Senator Gorton and me in supporting this Senate resolution expressing our strong concerns about a United-US Airways merger." # # #