[Senate Hearing 106-1026]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 106-1026




                               before the

                       SUBCOMMITTEE ON ANTITRUST,

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION


                             JULY 10, 2000


                             PITTSBURGH, PA


                          Serial No. J-106-102


         Printed for the use of the Committee on the Judiciary

73-463                     WASHINGTON : 2001

For Sale by the Superintendent of Documents, U.S. Government Printing Office
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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman
STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona                     HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire
             Manus Cooney, Chief Counsel and Staff Director
                 Bruce A. Cohen, Minority Chief Counsel

      Subcommittee on Antitrust, Business Rights, and Competition

                      MIKE DeWINE, Ohio, Chairman
ORRIN G. HATCH, Utah                 HERBERT KOHL, Wisconsin
ARLEN SPECTER, Pennsylvania          ROBERT G. TORRICELLI, New Jersey
STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
             Pete Levitas, Chief Counsel and Staff Director
        Jon Leibowitz, Minority Chief Counsel and Staff Director

                            C O N T E N T S




Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     1


Fisher, Hon. Mike, Attorney General, Pittsburgh, PA..............     4
Fratto, Tony, Vice President, Government Affairs, Pittsburgh 
  Regional Alliance, Pittsburgh, PA..............................    29
Fox, Christine, President, Communication Workers of America, 
  Local 13302, Pittsburgh, PA....................................    38
Guerriero, David, Vice President, Master Executive Council, US 
  Airways for the Association of flight attendants, AFL-CIO......    43
Longmuir, Shelley, Senior Vice President, International 
  Regulatory and Governmental Affairs, United Airlines...........    17
Mahone, Glenn, Chairman of the Allegheny County Airport 
  Authority, accompanied by Kent George, Executive Director, 
  Allegheny County Airport Authority.............................    25
Murphy, Hon. Tom, Mayor, Pittsburgh, PA..........................     9
Nagin, Larry, Executive Vice President, Corporate Affairs and 
  General Counsel, US Airways....................................    18
Roddey, James, Chief Executive of Allegheny County, Pennsylvania.     6
Santorum, Hon. Rick, a U.S. Senator from the State of 
  Pennsylvania...................................................     3
Schifano, Frank, President and Chairman of the International 
  Association of Machinists, Local Lodge 1976....................    37
Taylor, Lowell, Professor of Economics, H. John Heinz III School 
  of Public Policy and Management, Carnegie-Mellon University....    27



                         MONDAY, JULY 10, 2000

                           U.S. Senate,    
Subcommittee on Antitrust, Business Rights,
                                   and Competition,
                                Committee on the Judiciary,
                                                    Pittsburgh, PA.
    The subcommittee met, pursuant to notice, at 12:15 p.m., in 
the Gold Room, Allegheny County Courthouse, Pittsburgh, PA, 
Hon. Arlen Specter presiding.
    Also present: Senator Rick Santorum.

                   THE STATE OF PENNSYLVANIA

    Senator Specter. If we may proceed. It is 12:15. We have a 
long list of witnesses. Good afternoon, ladies and gentlemen. 
This hearing of the Antitrust Subcommittee of the Senate 
Judiciary Committee will now proceed.
    This is the third in a series of hearings on the proposed 
merger for acquisition of US Airways by United. Senator 
Santorum and I met with the chief executive officers of the two 
airlines on May 25.
    The Judiciary Subcommittee had a hearing in Washington on 
June 14 and a hearing in Philadelphia on June 26. We shall have 
another hearing by the subcommittee in the Lehigh Valley on 
July 24.
    This is a major issue confronting the United States, 
really, beyond the United States, the world, on air travel, and 
most specifically and emphatically on Pennsylvania.
    United is the world's leading airliner, US Airways number 6 
in the United States and number 10 worldwide, some 19,000 jobs 
in Pennsylvania and some 11,700 of those jobs here in 
    So it's a matter of enormous impact to Pennsylvania, and it 
has very, very substantial impact implications to the country.
    There is a concern that this merger may set off a wave of 
mergers. There is talk of a possibility of American combining 
with Northwest and Delta with Continental Airlines, and it is 
widely believed that the United acquisition of the now defunct 
Pan Am Airways in November 1985 spurred Northwest Airlines' 
acquisition of Republic, which has led to certain market 
    The issues facing the country are matters which Senator 
Santorum and I are obviously concerned about as U.S. Senators, 
and we have a particular parochial interest in Pennsylvania 
because of the very heavy impact of USAir and United, also, in 
    I am pleased to hear that there has been a commitment made 
on the reservation center just on Friday. I am pleased to hear 
there has been a commitment made on no more furloughs, no 
furloughs, with an extension of the 2-year period. But there 
remain many, many additional questions which are unanswered or 
have been unanswered for now more than 45 days.
    The issue of the furloughs, no furloughs, is good news, but 
the question as to whether people will be compelled to move 
away to make a nonfurlough policy ineffective--if you have to 
move to some far distant city, that doesn't mean you keep your 
job, doesn't mean you keep the same job, and it may result in 
not being able to keep the job.
    The issue of the maintenance center is one which Senator 
Santorum and I raised initially and, in fact, wrote to both 
airlines on May 24. Forty-five days have passed, and we haven't 
gotten an answer.
    We have looked to see what will happen in quite a number of 
specifics. I asked about the issue of written commitments at 
the hearing in Washington and have no assurance. I asked the 
question in Philadelphia and have no assurance, and unless 
these commitments are reduced to writing, such as the not 
raising the fares, so we have a question there with the 
category of fares enumerated being only 15 percent of the 
alliance, unless we have assurances in writing, it really is 
totally insufficient.
    I noted in yesterday's Washington Post the disclosures that 
there will be enormous benefits which will accrue to the 
executives of US Airways. Chairman Wolf is due to have $11.6 
million in benefits, and chief executive officer, Ralph 
Gangwal, $12.8 million in benefits, additional benefits to 
    And the question in my mind--there are two questions. Who 
is going to pay for all of that? It has to come out of 
somewhere. And the second question is one which bears on the 
issue of reliability on and objectivity in making a 
recommendation of the merger.
    Someone has a $12 million outcome in the merger, I have 
grave questions as to objectivity. It doesn't rule it out, but 
in my mind it raises a material question.
    I started out being skeptical about this merger, as I 
announced at the first meeting with the CEO's, and, candidly, 
I'm more skeptical today than I was before.
    I am skeptical because 45 days have passed with a good many 
questions which Senator Santorum and I have put on the table 
which haven't been answered, and there are a lot of people with 
anxieties in Pennsylvania, 17,000 people with anxieties around 
the country. And the CEO's have had answers to their questions, 
and I would like to have answers to the questions for the rank 
and file as both a Pennsylvania and a U.S. Senator.
    But speaking for myself, I'm going to continue to 
scrutinize the matter very carefully. I'm going to keep an open 
mind on it, but the longer the questions remainoutstanding, the 
more candidly, again, my skepticism grows.
    Senator Santorum and I have worked on this jointly. He has 
been very, very diligent in this issue, as with the others, and 
I'm glad to yield to him at this time for his opening 

                        OF PENNSYLVANIA

    Senator Santorum. Thank you, Mr. Chairman, and thank you 
for holding these hearings across the Commonwealth and for the 
work that you've done along with the Subcommittee Chairman, 
Senator DeWine from Ohio, on holding the hearing in Washington, 
    I think it's very important that we continue to monitor 
this situation. I think you're absolutely right. There are a 
lot of questions that still need to be answered. I think I made 
myself perfectly clear as to what the bottom line is for me.
    I feel that their merger has a potential up side for 
Pennsylvania. Certainly, as I travel in and out of the 
airports, and I've been doing a lot of that recently, traveling 
in and out of the airports around Pennsylvania, there is, I 
think, some optimism on the part of USAir employees. In 
Philadelphia, there is a lot of construction going on out 
there. The potential of this owning up Philadelphia as a major 
hub airport for international travel to Europe is a 
tremendously positive thing for that airport.
    So I see this as a clear winner for the people of 
Philadelphia and for the economy of Southeastern Pennsylvania.
    With respect to the rest of the state, again, the 
commitments that we seem to have are solid in the sense that, 
you know, I have not seen any, nor heard of any talk of losing 
any service in any of the commuter areas throughout 
    But it leaves us to why I think this hearing is the most 
important one, frankly, is because the area that I have the 
gravest concerns is here in Pittsburgh.
    And I do so for several reasons. No. 1, the bulk of the 
employee population of US Airways is right here. No. 2, one of 
the major facilities where those employees reside is a 
maintenance facility here, where there was a commitment from US 
Airways to build a maintenance facility and to build it here in 
    We do not have that commitment under this merger. And the 
impact on jobs would be tremendous, but I think it goes beyond 
that. We have a commitment that Pittsburgh will remain a hub, 
and I understand that, and I appreciate that.
    But I also realize that Pittsburgh has one of the lowest, 
for a hub, one of the lowest number of originations of any hub 
of its size in the country. And the fact that we have the best 
airport in this country I think helps us in the long run.
    But I would like to see some more anchoring of United here 
in this community other than just a hub. And I think the best 
way to do that is through a maintenance facility.
    Because if you have a maintenance facility you're going to 
have to have airplanes there, and the best place to have a 
maintenance facility is the place where you have a lot of 
airplanes, and that would be a hub.
    So I think the maintenance facility goes beyond just 
helping create and keep those jobs here in Pittsburgh, but I 
think it also can have the beneficial effect of bolstering the 
long-term survivability of Pittsburgh as a hub airport.
    And if Pittsburgh stays as a hub, and I hope that it will, 
I think that has tremendous benefits to Southwestern 
Pennsylvania, with increased service, particularly west of 
here, that United would bring, that US Airways has not, with 
one-stop service to the Orient and to South America and Central 
    Again, I think it would be positive things for our economy 
here in Southwestern Pennsylvania. Arlen mentioned, you know, 
we're U.S. Senators, but I'm a Senator from Pennsylvania, and 
my first and foremost consideration is how it impacts 
    And at this point I'm not sure that I can answer that 
question. And until I have the questions answered as to how the 
merger is going to impact the people here in Pittsburgh, both 
from the maintenance facility and some of the other facilities 
that are here and some of the other employees that are here, 
I'm going to withhold my support or, in fact, my opposition.
    But I would say, and I will say to the representatives from 
the companies, that there are a lot of folks out there who are 
not in the service area who are in Congress who are very, very 
concerned about this merger and the potential domino impact.
    And I would suggest that if you want some folks from the 
other side, get us the answers that we need, so we can go to 
bat for you. Because if you don't get us the answers, I'm 
willing to sit in the dugout until the answers are given to me.
    Senator Specter. Thank you very much, Senator Santorum. We 
have a very distinguished first panel today.
    The attorney general of Pennsylvania, Mike Fisher, elected 
in 1996. Before that he was in the Pennsylvania General 
Assembly for 22 years, 16 in the senate, 6 in the house, former 
assistant District Attorney, candidate for Governor, candidate 
for Lieutenant Governor, very successful and distinguished 
public servant.
    Attorney General Fisher, welcome, and we look forward to 
your testimony. We're going to set the time at 5 minutes, and 
we ask that that time be observed to the extent possible, 
leaving the maximum time for dialog, questions and answers.
    The floor is yours, General.



    Mr. Fisher. Thank you very much, Senator Specter, Senator 
Santorum. We certainly appreciate your interests in holding 
these hearings and participating in them. I appreciate the 
opportunity to have this chance here in Pittsburgh to address 
some of my concerns about the merger.
    Before I begin, let me update you a little bit on the 
status of our investigation with an important caveat. We're 
conducting a joint investigation with the U.S. Department of 
Justice, 25 other states and the District of Columbia.
    My staff and I are leading this investigation, at least 
from the State's standpoint, with the State of New York.
    Under the Department of Justice's Federal/State merger 
protocol and the National Association of Attorneys General 
merger compact, which govern multistate merger investigations, 
we're required to keep all of the information received from the 
parties confidential, unless we file suit to block the merger. 
Even then the information can only be used in the context of a 
law enforcement proceeding.
    Therefore, I cannot comment or share the information that 
we have been provided so far, but I do want to share with you 
some of my thoughts.
    I also want to mention that although our investigation is 
joint, we are not bound to come to the same conclusion and 
follow the same result as the Department of Justice.
    I have great concern about the implications of this merger 
on airline competitiveness in Pittsburgh, across the 
Commonwealth, and across the Nation. We'll make a decision on 
whether to challenge the merger after reviewing all of the 
information provided by the parties, comparing that information 
obtained in our investigation, and reviewing that information 
with our economists.
    Let me talk about several issues today.
    First consumers, especially small business consumers, are 
really steamed about the high cost of air travel in the 
Northeast. The cost to fly from Harrisburg to Pittsburgh is an 
outrageous $550 today.
    My office and staff and I often take the 4-hour drive 
rather than flying the quick 35-minute flight because of that 
    This problem exists not only for consumers in Pittsburgh, 
but also for consumers throughout the Mid Atlantic and New 
England states. I can give you numerous examples of other 
unbelievably high fares.
    The airlines say these high fares reflect the high costs of 
serving a small number of consumers on short haul routes. 
However, on some short haul routes where there is competition, 
there are good prices.
    For example, US Airways' 327-mile flight from Baltimore to 
Providence is only $178. The trip from Pittsburgh to 
Philadelphia, which is about the same distance, is three times 
that amount. Why? One answer. Southwest Airlines.
    We have to look carefully at whether this acquisition will 
improve the situation or make it worse.
    Second, the other thing that gets consumers steamed as much 
as high cost is the abysmal and declining quality of service. 
Ask anyone who travels today. It's not uncommon to hear of 
flights delayed several hours, flights canceled, flight times 
longer than usual and not a lot of basic information.
    Third, everyone is concerned and interested in new service. 
It's very important in the Northeast, because this market has 
been dominated by US Airways for very long. The service does 
not begin or stop in either--unless it comes into a hub. There 
isn't the kind of service.
    Giving an example, there was one not too long ago nonstop 
service--Senator Specter probably remembers this--between Erie 
and Harrisburg. Because it's no longer a hub, that service has 
been discontinued. We need to be concerned about the 
availability of new service as a result.
    Finally, several airports have capacity restraints. In 
Philadelphia it's gates. At LaGuardia it's take off and landing 
slots. We have to look at whether the control over the majority 
of that capacity at airports like these will further reduce 
    We've been asked about some divestitures. Quite frankly, 
the United US Airways have proposed DC Air out of Reagan 
National. We're not sure that that divestiture is sufficient.
    With that, Senator Specter, Senator Santorum, I'll conclude 
my remarks. But let me say that as with my colleagues in 25 
other states, we're concerned not only about this merger, but 
the impact that this merger will have upon future mergers in 
the airline industry across this country.
    I'm greatly concerned about the creation of what would 
constitute an airline oligopoly in this country with perhaps 
only three major airlines controlling most of the domestic 
    Those are the issues we'll be looking at. We'll be pleased 
to share with you our findings as we proceed through this, but 
once again I want to thank you for your commitment to holding 
these hearings.
    Senator Specter. Thank you very much, Attorney General 
Fisher. We now turn to the distinguished chief executive of 
Allegheny County, James Roddey, elected to that position last 
November, graduate of Texas Christian University, captain of 
the Marines, past president of Charter Communications 
Corporation, and Rolands Communications.
    So he brings a lot of energy and determination to his new 
job and, welcome, Mr. Roddey, and we look forward to your 

                   STATEMENT OF JAMES RODDEY

    Mr. Roddey. Thank you, Mr. Chairman, and thank you Senator 
Santorum for conducting these hearings. We're particularly 
pleased that you have taken the very high level of interest 
that you have in this issue, which is vitally important for our 
    I have submitted written testimony, and I will depart from 
that in the interest of time and just hit a few of the 
highlights that are number one on our agenda.
    Senator Specter. Your full statement will be made a part of 
the record, and we appreciate your approach.
    Mr. Roddey. Thank you. No. 1, with the hardships endured by 
our region in the 1970's and 1980's, the word merger makes us 
all very nervous. One of our foremost concerns is for the 
approximately 11,700 individuals currently employed by US 
Airways at Pittsburgh International Airport.
    We need a commitment that these jobs will remain in our 
region. We have had the early commitment that no one would be 
furloughed for 2 years, but we understand that that has now 
been lifted by United Airlines, and they are guaranteeing every 
person employed with US Airways a job permanently.
    However, we do not know how many people would remain here 
and how many might be transferred, although we have had, as you 
mentioned earlier, the commitment as recently as Friday that 
the reservation center, some 800 jobs would remain in this 
    No. 2, the taxpayers of Allegheny County provided the 
financial vehicle through bonds to fund the construction of the 
$800 million midfield terminal complex at Pittsburgh 
International Airport. US Airways is the principal guarantor of 
those bonds.
    US Airways presently uses 90 percent of the midfield 
terminal and pays the majority of the outstanding debt, which 
totals over 700 million today. We need written assurances that 
United Airlines will assume existing lease and guaranteed 
payments of all future obligations of US Airways.
    We have had those commitments verbally, but as you, we 
would like to see those reduced into writing.
    With the significant Federal support and the expectation 
that Pittsburgh would be a major hub, the international airport 
opened in 1992. US Airways currently operates about 515 flights 
a day to 110 nonstop destinations throughout the United States 
and Europe.
    United Airlines must commit to maintain at least the 
existing level of service, and that commitment should be 
included in the conditions of approval in the merger by the 
Justice Department.
    On a long-term basis, Pittsburgh must remain a significant 
U.S. domestic hub. Once again, we have had assurances that, in 
fact, the flights will increase, there will be more 
destinations, more international flights available, but we 
would like to see those commitments in writing.
    By year's end US Airways and United Airways will have an 
extensive fleet of Airbus aircraft with numerous new aircraft 
on order. Both airlines have indicated the need for a new 
maintenance facility to perform maintenance and safety checks 
on these aircraft.
    A skilled work force is available right now in Southwestern 
Pennsylvania to perform these tasks, and the needed facilities 
have already been designed for construction at Pittsburgh 
International Airport, and we are very, very concerned that we 
get this new maintenance facility as you mentioned in your 
opening remarks.
    We have been told by United Airlines that they will give us 
an answer before the end of this month, and I am optimistic 
that that answer will be positive. We don't have it yet, but we 
are hoping that we do get that commitment.
    And I must add, Senators, both US Airways and United 
Airlines have been very cooperative in the meetings that I've 
had with both the chairman and the other officials, and I am 
optimistic again that we will get these commitments that we 
need in writing.
    Finally, just let me say that if this merger is not 
approved, I think we should also be considering the 
alternatives. US Airways is not a strong financial 
organization. Should we have a down turn in the economy, it is 
very possible they could be in trouble. And they are now in 
play, and it is logical to assume that at some point they are 
going to be sold.
    We need to analyze, as we analyzed this merger, whether or 
not United Airlines is a better fit than perhaps some other 
airlines or some other alternatives, the airline perhaps being 
broken up and sold to other airlines. That perhaps would have 
more dire consequences for this region than the merger being 
contemplated now.
    Thank you, Mr. Chairman. That concludes my remarks. Thank 
you, Senator Santorum.
    [The prepared statement of Mr. Roddey follows:]

                 Prepared Statement of James C. Roddey

    Good morning, Mr. Chairman and Committee Members. My name is Jim 
Roddey and I am the Chief Executive of Allegheny County, Pennsylvania. 
I would like to thank the Committee for this opportunity to present our 
region's views on United Airlines' $11.6 billion acquisition of US 
    In the early 1980s unemployment in Pittsburgh was at its height 
following the closure of virtually all the major steel mills. The 
region suffered the largest job loss per capita in our country's 
history. By the early 1990's, the city was only reporting half the job 
growth of the national average.
    We have been working diligently to recover, and finally our region 
is beginning to grow. 120,000 people are employed in the technology 
field. That represents 12% of the workforce and 18% of the payroll. Our 
colleges and universities are world-renowned and we stand among the top 
ten centers in medical research.
    Today, Pittsburgh is the corporate headquarters of many Fortune 500 
companies. We have numerous business parks nurturing both U.S. and 
foreign investment. Multinational companies like Sony and Bayer have 
located in the region and many local corporations like H.J. Heinz, 
Alcoa and PPG continue to succeed in the global marketplace.
    Pittsburgh International Airport (PIT) is the world's gateway for 
Pittsburgh, southwestern Pennsylvania, northern West Virginia, and 
eastern Ohio. it is an integral part of the economic fabric of its 
serving area, creating over 18,000 direct airport-related jobs and over 
$3.5 billion a year in economic impact.
    PIT has received worldwide recognition for its now famous Airmall 
, featuring over 100 retail, specialty services and food and 
beverage stores all at guaranteed street prices. Its distinctive 900-
acre X-shaped terminal is designed to give connecting passengers easy 
access to all 75 gates without ever changing levels or terminals. And 
just last year, because of it's traveler-friendly design, the readers 
of Conde Nast Traveler magazine voted Pittsburgh International Airport 
the best airport in North America and the third best airport in the 
    Pittsburgh International is an expanding airport with a significant 
list of development projects. This month, we opened a Hyatt-Regency 
airport hotel and conference center. We also plan to more than double 
the cargo ramp and building capacity, and we are creating a Business 
Aviation Center and a 300,000 squre foot Airside Business Park.
    PIT covers more than 12,000 acres, making it the third-largest 
airport complex in the U.S., so large that you could fit Atlanta and 
Chicago O'Hare airports within its boundaries. The huge amount of space 
we have available gives us many advantages. The apron is large enough 
for one aircraft to pull back from the gate while another is pulling 
into the same space. The system of taxiways surrounding the entire 
airside building allows aircraft to exit the runways at a greater 
speed, taxi in either direction and avoid delays. And we have excess 
airspace and airfield capacity to accommodate future growth.
    Located roughly midway between New York and Chicago, Pittsburgh 
lies within one hour's flying time of nearly 50 percent of the U.S. and 
Canadian populations or 71.3 million people, and 63 percent of U.S. 
manufacturing output.
    And don't worry about the weather. Smooth operations regardless of 
the weather make PIT North America's airport of choice for reliability.
    Clearly, Pittsburgh International Airport is one of the 
northwestern Pennsylvania region's most significant assets. Presently, 
US Airways has a major hub agreement at Pittsburgh International 
Airport generating 515 flights per day both domestically and 
internationally. With United Airlines and US Airways announcement on 
May 23, 2000, I am deeply concerned not only about the continued 
presence of a major hub at Pittsburgh International Airport, but also 
for the continued employment of the approximately 11,700 employees of 
US Airways in southwestern Pennsylvania.
    With the announced acquisition by United of US airways, it is 
imperative that a number of matters that affect our region are 
contained in any Conditions of Approval, which the Department of 
Justice and Department of Transportation would make, if they should 
decide to grant approval for this merger.
    While the discussions I have had with James Goodwin of United 
Airlines and Stephen Wolf of US Airways have been very positive, 
contracts between parties often do not turn out as contemplated. 
Therefore, I request that this Committee urge the Department of Justice 
to ensure the following items are addressed in their Order:
    1. With the hardship endured by our region in the 70's and 80's, 
one of our foremost concerns is for the approximately 11,700 
individuals currently employed by US Airways in southwestern 
Pennsylvania, eastern Ohio and northern West Virginia. We need an 
absolute commitment contained in the Conditions of Approval of this 
merger that these jobs will be maintained in our region beyond United's 
two-year pledge.
    2. The taxpayers of Allegheny County provided the financial vehicle 
through bonds to fund the construction of the $800-million Midfield 
Terminal Complex at Pittsburgh International Airport. US Airways is the 
principal guarantor on those bonds. US Airways presently uses nearly 90 
percent of the midfield terminal and pays the majority of the 
outstanding debt, which totals over $700 million. We need written 
assurances that United Airlines will assume US Airways existing lease 
and guarantee payment of all future obligations of US Airways.
    3. With significant federal support and the expectation that it 
would be a major hub, Pittsburgh International Airport opened in 1992. 
US Airways currently operates approximately 515 flights a day to 110 
non-stop destinations throughout the US and Europe from Pittsburgh 
International Airport. The Airport is the economic engine of the region 
and provides us access to the world and the world access to our region. 
While United flies mostly east-west domestic flights and international 
routes, the US Airways strength is in its north-south routes on the 
East Coast, we must be certain that the existing level of service is 
maintained and included in the Conditions of Approval of the merger. On 
a long-term basis, Pittsburgh must remain a significant US domestic 
    4. By year's end, US Airways and United Airlines will have an 
extensive fleet of Airbus aircraft with numerous new aircraft on order. 
Both airlines have indicated a need for a new maintenance facility to 
perform maintenance and safety checks on these aircraft. An excellent, 
trained workforce is available right now in southwestern Pennsylvania 
to perform these tasks and the needed facilities have already been 
designed for construction at Pittsburgh International Airport. We ask 
your help in urging United Airlines to follow through with US Airways 
plans to construct this facility, and commit to do so within the next 
two years.
    Pittsburgh International Airport is strategically located in North 
America to reach much of the population of the United States and Canada 
within 1-hour flying time. National and international travelers give 
Pittsburgh International Airport an A+ rating. Our workforce and work 
ethic are second to none. We are capable of handling any aircraft used 
today and our facilities are easily expandable.
    Not only is Pittsburgh International Airport an economic generator 
in terms of jobs, but it serves as a major connection hub, linking 
Pittsburgh businesses, passengers and cargo with cities around the 
world. It is extremely well located in every sense and its physical 
structure is flexible, functional, attractive and expandable.
    Mr. Chairman and Committee members, I ask your assistance to 
strongly convey to the Departments of Justice and Transportation our 
need for guarantees to preserve the economic future of a region rich in 
resources. Pittsburgh is poised for takeoff. Thank you for the 
opportunity to present this information to you today.

    Senator Specter. Thank you very much, Mr. Roddey. We turn 
now to Mayor Murphy, elected and starting serving in January 
1994 and before that was for the better part of a decade and a 
half in the General Assembly. Graduated from John Cornell 
University, graduate degree with honors from Hunter College, 
and a very effective traveler to Washington, DC, in terms of 
funding from the Federal Government.
    Right now Senator Santorum and I are laboring under that 
heavy transportation light rail tunnel cost which we're 
plugging at, but I see those stadiums are going up, and we're 
in there pitching for you all of the way, Mayor.


    Mayor Murphy. You're great partners with us. Thank you for 
having this forum. I won't read this, but simply to say----
    Senator Specter. Thank you. It will be made a part of the 
    Mayor Murphy. Thank you. You've been part of a team that 
has really begun to turn around this region. There is not a 
region in the country that suffered greater population losses 
than Pittsburgh through the 1970's and 1980's.
    We now see the lowest unemployment in almost three decades 
in Western Pennsylvania, a new spirit of momentum, a new spirit 
of optimism. You've been part of that, as we see new 
construction happening all over the region.
    And clearly the airport is a central part of that, not only 
for Allegheny County, but really for the tristate area. If you 
look at the employment figures from the airport, you will see 
that the major employer in Beaver County is the Allegheny 
County International Airport. One of the largest employers in 
Washington County, one of the largest employers in the 
panhandle of West Virginia is the Allegheny County Airport, as 
well as eastern Ohio.
    And so that this is an important facility, and I won't 
repeat what County Executive Jim Roddey said, just you need to 
know that this is a bipartisan effort here. This is a county 
facility. I will be working closely with the county executive, 
Jim Roddey, to be sure that we are together in our support or 
disapproval of this merger.
    But the four main issues for us clearly are the jobs, the 
responsibility for the continued payment of the bonds that 
built the airport, the continuation of this area as a hub, 
because it is so important to the growth of Pittsburgh and, 
finally, the ability to get the maintenance facility that this 
merger will require the airlines to have.
    I think we'd like to look upon this as an opportunity, 
rather than as a threat, but it clearly is both. We want to 
know that we're going to be held harmless but would like to 
look at an opportunity for future expansion.
    We are an area that has had a checkered history of mergers. 
We have watched well-respected companies disappear almost 
overnight, such as Koppers and Gulf Oil, through mergers that 
did not benefit this region at all.
    On the other hand, we have watched two major banks, Mellon 
and PNC, grow remarkably in Western Pennsylvania because of 
mergers. We're watching Heinz prosper right now and grow 
because of mergers.
    So, once again, we see this as both a threat and an 
opportunity, and with your help and all of us working together, 
I believe this can be made into an opportunity for the region. 
But we need to see some commitments to hold us harmless and see 
the opportunity to grow into the future.
    We'll look forward to continuing to work with you on the 
dialog in this, and I believe that this region can benefit from 
this, if we hold firm or clearly know what we want to see 
happen and that the airlines respect our position and support 
it and work with us to make this succeed. Thank you.
    [The prepared statement of Mayor Murphy follows:]

                 Prepared Statement of Mayor Tom Murphy

    Let me first begin by welcoming the distinguished members of the 
United States Senate Judiciary Subcommittee to the City of Pittsburgh, 
and for providing us this forum to express our region's views and 
concerns regarding the possibility of United Airlines' $11.6 billion 
acquisition of US Airways. As you will come to recognize, we come 
before you today in a bipartisan, united approach to ensure that this 
merger is approved with the best interests of our region in mind.
    Many of you may be familiar with Pittsburgh's recent history. The 
collapse of the steel indstry left a hole in our economy that we are 
only now beginning to replace. In addition, over the course of the past 
30 years, Pittsburgh has led the country in one major statistic--
population loss. In fact, Pittsburgh suffered the largest population 
loss in America. For too long now, Pittsburgh has lagged behind while 
the rest of the country has flourished during the longest economic boom 
in our country's history.
    Today, however, I am delighted to report to you that Pittsburgh is 
re-emerging onto the global marketplace. We have retooled our economy, 
and built a new region on the strength of our world-renowned 
universities and our top-rated medical facilities. Pittsburgh has 
successfully made the transition from steel to technology. You may be 
aware that recently the Wall Street Journal rated Pittsburgh as one of 
the hottest market for new technology, that Carnegie Mellon University 
has been rated the ``most wired'' university in America and that we now 
employ more people locally in the field of technology that in any other 
industry. In addition, we are home to two of America's top ten 
financial institutions in PNC Bank and Mellon Bank, and the 
headquarters of such renowned companies as the H.J. Heinz Corporation 
and Alcoa. We now have more than $4 billion worth of economic 
development underway throughout our City, from the construction of new 
world-class ballparks for our sports teams, to a tripled-in-size 
convention center to new housing and trails all along our riverfronts, 
and have managed to turn our old abandoned industrial sites into 
centers of technology, new housing communities and recreational 
opportunities for our citizens. Additionally, the courage and vision of 
the late Allegheny County Commissioner Tom Foerster in building 
Pittsburgh International Airport and acquiring thousands of surrounding 
acres for development positioned as well as we head into the future.
    I cannot emphasize strongly enough to this distinguished committee 
the importance of Pittsburgh International Airport and the presence of 
US Airways as a major hub to the rebirth and continued revitalization 
of our local economy. Employing more than 11,000 persons from the tri-
state area, Pittsburgh International Airport has quickly become one of 
our most strategic assets, as well as a strong economic engine for our 
continuing recovery.
    As Senators Spector and Santorum can verify, Pittsburgh 
International Airport is one of our region's most important economic 
generators, one that will help us shape Pittsburgh's future as we move 
into the new millennium. Presently, US Airways has a major hub 
agreement at Pittsburgh.International Airport generating 515 flights 
per day both domestically and internationally, and it is imperative 
that Pittsburgh International Airport maintain its status as a major 
hub airport for United Airlines.
    As you have already heard through the testimony of Allegheny County 
Chief Executive Jim Roddey, it is important that a number of matters 
that affect our region are contained in any approval of this deal. I 
would like to take this opportunity to reiterate those conditions, and 
to affirm that Chief Executive Roddey and I will work together to 
ensure that these conditions are contained in any agreement approved by 
the Departments of Justice and Transportation:
    We are committed to revitalizing our economy and providing quality 
job opportunities for our residents. We must have a solid commitment 
from United Airlines that the merger with US Airways will maintain the 
more than 11,000 jobs contained in United's initial proposal.
    Significant local tax dollars were utilized to finance the 
construction of the $800-million Midfield Terminal Complex at 
Pittsburgh International/ Airport, US Airways is the principal 
guarantor on those bonds and pays the majority of the outstanding debt, 
which totals over $700 million. We must receive written assurances that 
United Airlines will assume US Airways existing lease and guarantee 
payment of all future obligations of US Airways.
    Pittsburgh must remain a significant US domestic hub. As I have 
said, the Airport is one of the most important economic engines in our 
region and must continue to serve as a hub to ensure that continues 
into the future. We must be certain that the existing level of service 
is maintained under United Airlines stewardship and is included in the 
approval of the merger.
    For some time now, our region, has been working to locate a new US 
Airways maintenance facility for their aircraft here in Pittsburgh. It 
is clear that United will also have a need for such a facility given 
the estimated size of its fleet following the merger. We contend that 
Pittsburgh is the perfect location for this new facility. I urge you to 
ensure that United Airlines follow through with US Airways plans to 
construct this facility, and that they commit to doing so within the 
next two years.
    The importance of Pittsburgh International Airport and its 
tremendous impact upon Southwestern Pennsylvania cannot be understated. 
Pittsburgh International Airport serves as our gateway to the world, is 
a major center of employment and one of the strongest engines driving 
our economic recovery. We view the possible merger of United Airlines 
and US Airways with cautious optimism, and look forward to working with 
this committee to ensure that this merger serves not only the interests 
of Southwestern Pennsylvania, but the entire country as well.
    As you may have gathered, we are quite proud of our City and our 
region. We are excited by the opportunities our future holds, and hope 
that you too will share our enthusiasm. With your help and leadership, 
Pittsburgh will continue to rebound.
    Once again, I want to thank you for coming to the City of 
Pittsburgh today to listen to our concerns about the potential 
acquisition of US Airways by United Airlines. We have come before you 
today in a bipartisan effort, and are united in our concerns and goals 
for this important regional asset.

    Senator Specter. Thank you very much, Mayor Murphy. Senator 
Santorum and I will take 5-minute rounds, as well.
    Mr. Roddey, you put your finger on a critical factor and 
perhaps the critical factor, and that is what would the future 
of US Airways be without a merger.
    You talked about being in play. There is hardly any 
corporation today that is not in play subject to being taken 
over in one way or another.
    Now, I've asked that question directly and haven't gotten 
an answer, but let's be blunt about it. No reason to beat 
around the bush. We're going to have to make some tough 
judgments. And the five of us have some very heavy 
responsibilities to a lot of people in this community, in this 
State, and in this Nation.
    When you have people who stand to profit by $12 million if 
the merger is completed, does that raise a question in your 
mind as to the objectivity of the answers on, say, a critical 
question like can US Airways make it without being acquired?
    Mr. Roddey. Well, Senator, I am not an expert on the 
airline industry. However, I do know that US Airways is the 
only remaining mature cost airline in the business. The other 
airlines that are of similar size, particularly Continental and 
TWA, have both been through bankruptcies, if not once, but two 
times. Therefore, they have a different cost structure. And I 
know that it's a very competitive business.
    I also know, Senator, that competition in the airline 
industry is likely to be international and global, as all 
businesses are becoming global. US Airways has about 1.6 
million international passengers today. That compares with 
about 30 million with British Airways and plus 25 million of 
either four or five of the major international carriers.
    They need an opportunity to be international, and the 
merger does give them that opportunity.
    I would think, and it would be my judgment, from all of the 
people that I have spoken to, that it would be likely that US 
Airways, at some point over the next 4 or 5 years would be sold 
or broken up.
    Senator Specter. Attorney General Fisher, let me go to the 
part of the question Mr. Roddey didn't answer. You're in the 
business of evaluating demeanor all of the time. Does it 
trouble you that the CEO's are going to get $12 million?
    Two parts. Where is that going to come from? Is that going 
to come from furloughs? Is it going to come from reduction in 
    And the second part of the question, because the clock is 
ticking, does that impact on the objectivity of their 
    Mr. Fisher. Well, I'm not going to prejudge the objectivity 
of their responses until we know more of the facts. But it 
raises a couple of issues.
    First of all, that's why I think it's very important at a 
bare minimum, whether or not this matter ends up in the Federal 
courts or the State courts, and whether we bring it or the U.S. 
Department of the Justice brings it, that in the final analysis 
it will be a written document.
    So that we don't have to rely just on the representations 
of officers, whether they be here now with the USAir, whether 
they be United, that all of the deal has to be resolved and be 
put down into a consent decree, and that's what we would drive 
    Second, it also tells me that if there is enough money to 
pay those kinds of bonuses, and I'm not here to be critical of 
those bonuses, but it tells me that there is enough value in 
this airline that the dire picture that some have painted for 
the near future probably isn't there.
    They wouldn't be committing to this. They wouldn't be 
committing to twice the current market value of the stock if 
USAir wasn't a very valuable airline which we think can stand 
on its own two feet. And if we had our druthers, six would be 
better than three.
    Senator Specter. Stand on its own two feet even if it 
didn't have anybody helping to hold it up like United?
    Mr. Fisher. I think it's a very strong airlines today in 
the current marketplace, and we think, based on what we know 
and what the market shows today, that it can continue to 
    Senator Specter. Mayor Murphy, there is an interesting 
chart here.
    Mayor Murphy. Is this one of your famous charts, Senator? I 
remember a healthcare argument a few years ago where you had 
that magnificent chart, also.
    Senator Specter. Thank you very much, but this may be a 
more famous chart.
    Mayor Murphy. OK.
    Senator Specter. That chart just defeated the Clinton 
healthcare program. This chart could save 17,000 jobs.
    Mayor Murphy. That's right.
    Senator Specter. This chart affects what is currently in 
play by US Airways and what United has and what the total would 
be. And as you can see, in Pittsburgh we'll end up with an 88-
percent domination by a combination, although it's very high 
now. It's 86 percent.
    In Scranton and Philadelphia and all over the State, the 
total is just very, very high. And my question is--and this is 
sort of a generalized question--but does that trouble you?
    Mayor Murphy. It does. Let me just say I think weall in 
Pittsburgh appreciate the convenience of living in a hub city and being 
able to have so many nonstop flights to so many locations in 
Pennsylvania and outside of the State.
    On the other hand, on a regular basis, I hear, as I visit 
corporations about encouraging them to continue to invest in 
Pittsburgh and Western Pennsylvania, often I hear that one of 
the single biggest complaints they have at this point is not 
about State taxes but about the cost of flying out of 
    In fact, one corporation, and I will try to get this for 
you, documented the cost over a 6-month period of their 
employees flying out of Pittsburgh versus their employees 
driving to Cleveland and flying out of Cleveland and estimated 
they would have saved $500,000 on the difference in flights, 
and again, as the attorney general said, the difference was 
Southwest Airlines.
    So that is a dual-edged sword for us here, because we do 
enjoy a large number of flights, but the costs are significant 
for us that we pay and our business community pays as they try 
to do business around the world.
    For smaller cities in Pennsylvania such as the Eries and 
the Lehighs and the Scrantons, the loss of flights, if that 
would happen, would be devastating to those cities, as they 
also try to come back from an economic turnaround that they're 
    And talking to the Mayor of Erie or the Mayor of Scranton, 
more recently, representatives from the Mayor of Scranton, 
those flights, though they're few, are critical to the success 
of those cities. So that is an important issue, also, that I 
think we need to address.
    Senator Specter. One final comment before yielding this to 
Senator Santorum. Attorney General Fisher talks about the cost 
of flying from Harrisburg to Pittsburgh, and we've talked at an 
earlier hearing about it's being cheaper to fly from Harrisburg 
to San Francisco with an intervening stop in Pittsburgh.
    And the only reason people don't take the less expensive 
flight and end up in San Francisco is it is so much more 
attractive here in Pittsburgh.
    Senator Santorum.
    Senator Santorum. Thank you, Mr. Chairman. I would just 
like to ask the attorney general if you could just sort of 
review for us what your jurisdiction is here, what, in fact, 
can you do with respect to this merger? I mean, what role--
because everyone is sort of looking, at least we do on the 
Washington level, look at the Federal Trade Commission, look at 
the Justice Department.
    And I'd just like some understanding as to what your duties 
are and what your responsibility is and what actions you can 
    Mr. Fisher. Well, first of all, the U.S. Supreme Court said 
in 1990 that the State attorneys general do have jurisdiction 
standing to challenge mergers. Under our commonwealth 
attorneys' act, that responsibility is placed within our 
    The Justice Department and the FDC have recognized the role 
of the State AG's in this review. And it's actually very 
interesting, and I commented on it Friday.
    A lot of people say this is subject to the approval of the 
U.S. Department of Justice. That is a misnomer of sorts. It is 
not subject to the approval. The U.S. Department of Justice, 
who will do this review, and the State attorneys general have 
the right to object, as do other parties.
    So it's sort of a negative check-off of sorts, but that's 
why the review process is under way. Part of that review 
process, once these cases are reviewed, whether it be by us, 
whether it by Justice or the other, quite frequently end up in 
consent degrees.
    And the importance of consent decrees is that all of the 
promises and all of the commitments that are made can be put 
down in black and white. And it gives us as the State--and we 
have the biggest role to play in this merger because 
Pennsylvania will be impacted the most.
    It gives us the ability, if promises are not kept and if 
they're broken, to go to court to have them enforced.
    Senator Santorum. Are you working with other attorneys 
general to----
    Mr. Fisher. We do. There are 25 other States, and the 
District of Columbia, who are working with us. We have taken 
the lead on the investigation with the attorney general of New 
York. And we have broken up the division of responsibilities 
with the U.S. Department of Justice. They are looking at some 
of the international implications.
    We have begun some of the investigation of some of the 
domestic implications. We have begun interviewing various 
smaller airlines as to their views, talking to local 
    So the investigations are working in a parallel track. Once 
we complete them, we'll share our results among the States and 
with the Justice Department, and we will make our respective 
    Senator Santorum. Let me ask you about some of those 
economic domestic concerns. And the Senator has his chart up 
here that shows the concentration of United after the merger 
and in our cities around Pennsylvania.
    Certainly, from our hub cities, the concentration is 
already high, and in other cities, I guess particularly now the 
Lehigh Airport is probably the one that would be themost 
impacted competitively.
    We're hearing stories already--I mean, Mayor Murphy has 
talked about business already, is--we've got some of the 
highest fares around. Is there any indication that this 
additional concentration will lead to even higher fares, or are 
we basically just saying we're going to be stuck with the same 
fare structure we have now?
    One of the concerns, you know, that's been brought to me is 
fares, and I'm concerned about fares, but I don't see any 
relief now.
    My question is this going to make it any worse? And I'm not 
too sure that additional concentration--I guess that's my 
question. Is this additional amount of concentration going to 
make it worse, or are we just basically stuck with the gal we 
brought to the dance?
    Mr. Fisher. It's a particularly interesting question from 
Pennsylvania, because Pennsylvania fares, I think, are probably 
the highest in the region. There is virtually no competition in 
Pennsylvania today when you look at it.
    But I think what we are--the purpose of our review will be 
to look at what it does to the market share. And will the 
market share as you have asked make it worse, or will it assure 
that it always stays the way it is?
    I think what a lot of people are hoping for is at least the 
opportunity for the entrance of low fare airlines in some 
places that touch Pennsylvania.
    Senator Santorum. How do you accomplish that? Do you 
accomplish that in the construct of this consent decree or 
whatever you are----
    Mr. Fisher. I think it's possible. I think that part of the 
problem here in Pittsburgh--and, you know, Jim and I have 
spoken--there are gates in Pittsburgh. But in many of the 
cities where airlines might want to fly, there is no ability 
for them to land.
    It's very difficult today to get additional landing rights 
in Philadelphia because of the absence of gates. It's difficult 
to get additional landing rights at LaGuardia because of the 
absence of gates.
    So there are problems that go beyond Pittsburgh, that go 
beyond the State that all factor into this. But these are many 
of the issues which we hope to collectively take into 
consideration if, in fact, we are able to reach an agreement as 
to what is good to solve all of the various problems we find 
    Senator Santorum. My time is up, so I'll turn it over to 
    Senator Specter. Take some more time.
    Senator Santorum. Do either of you have a response to that 
question as far as how you see the economics playing out? 
Obviously, for Pittsburgh, this additional concentration, is 
that of concern to you, that we may not be able to attract, 
since we have the gauge, we may not be able to attract another 
airline to come in and service this community?
    Mr. Roddey. Yes, it's always a concern, Senator. However, I 
think now is the time to address that. And as we review the 
documents and review this acquisition, if we're going to get 
some relief from the situation, I think now is the time to ask.
    It's clear that the premium price being paid by United for 
US Airways is so they can get entry into the very lucrative 
eastern market.
    If you look at East Coast flights, north and south up and 
down the East Coast, today United Airlines has one percent of 
that flight. And it's the most lucrative of anywhere in the 
country. US Airways has 37 percent.
    So they're paying a premium to buy their way into that, 
rather than try to go in and compete. It's very difficult to 
start competing when you don't have slots, you don't have 
gates. We did have the gates here, and I would hope that we 
could structure something in this merger that would allow us to 
have some competitive airlines in here.
    But the question of fares, I don't think the fares--you 
know, we've asked the question, and if--and I know both of you 
are aware of the testimony in Washington. Every place there is 
a super hub, we hear the same thing, about how high the fares 
    And the airlines have made a commitment not to raise the 
fare for 2 years, except for cost of living or fuel costs. 
Well, I don't think that's much of a commitment at all. If you 
recall, every time it's ever been raised, it's because of fuel 
prices or cost of living. So I think that the fares right now 
are going to remain high.
    Senator Specter. Thank you very much, Senator Santorum, and 
thank you Attorney General Fisher, Mayor Murphy, and Chief 
Executive Roddey. Thank you.
    Senator Specter. We'll now move to the next panel, Miss 
Shelley Longmuir, Mr. Larry Nagin.
    I want to welcome Ms. Shelley Longmuir, who is the senior 
vice president of International Regulatory and Governmental 
Affairs for United Airlines, a magna cum laude graduate with a 
double bachelor's degree in English Shakespeare literature from 
Brown, J.D. from New York University School of Law, and she 
held senior positions in the Bush administration at the U.S. 
Department of Transportation.
    Thank you for joining us, Ms. Longmuir, and we look forward 
to your testimony.



    Ms. Longmuir. Thank you, Senator Specter, Senator Santorum. 
On behalf of United Airlines, more than 100,000 employees 
worldwide, I appreciate the opportunity to be here today to 
discuss our merger with US Airways.
    The transaction will deliver new economic growth and travel 
opportunities to consumers here in Pittsburgh and throughout 
    Senators, I want to thank both of you for the attention 
that you have paid to our merger with US Airways. As you know, 
our chairman and CEO, Jim Goodwin, testified before your 
subcommittee last month in Washington. He also met with both of 
you in recent weeks to discuss the transaction.
    Members of your staff, Senator Specter, have also spent 
time with our senior financial team to review details of this 
merger. Mr. Goodwin has also met with Governor Ridge and 
Allegheny County Chief Executive Jim Roddey.
    Our general counsel has also met, and we are in an ongoing 
dialog with Attorney General Fisher.
    Shortly after we announced the merger in May, those 
discussions began and will continue throughout our review.
    United started flying from Pittsburgh 44 years ago, on 
January 22, 1956. Back then we flew four times a day to New 
York and had four daily westbound flights to Chicago and then 
on to Denver, Salt Lake City, Los Angeles, San Francisco, and 
some other western cities.
    Today United and United Express have a total of 14 daily 
departures from Pittsburgh. We fly nonstop to Chicago and 
Washington Dulles with connections to destinations around the 
    United has 94 employees in Pittsburgh today, a number that 
will dramatically increase after the completion of our merger 
with US Airways.
    When United began service from Pittsburgh in 1956, we ran 
an ad introducing ourselves to the community. We said then, 
``We recognize the privilege of serving the Greater Pittsburgh 
Area, that it carries also with it a responsibility, not only 
of providing good air service, but of being a good corporate 
citizen to the community. We intend to demonstrate our 
appreciation by fulfilling both of these responsibilities to 
the best of our ability.''
    Senators, what we said then is just as true today as it was 
44 years ago. United will provide the service that Pittsburgh 
customers deserve, and we will be good corporate citizens and a 
valuable asset to Pittsburgh and the airport of which this 
community is so justifiably proud.
    The United-US Airways merger will have a very positive 
impact on Pittsburgh. Pittsburgh is already a major hub for US 
Airways. When our merger is complete, it will become an even 
more significant hub for United Airlines.
    In all, United plans to offer nonstop or one-stop service 
from Pittsburgh to 254 domestic and international destinations. 
That's 78 more than US Airways currently serves and 143 more 
than are available today on United.
    We plan to offer four additional daily nonstop flights from 
Pittsburgh to three U.S. cities. That includes the only nonstop 
service to San Jose, CA, one of the high tech centers of the 
world; the only nonstop to Portland, OR; and two additional 
daily nonstops to Denver, a total of five a day to the Colorado 
    United also plans to offer new one-stop service to several 
Asia, Pacific, and Latin American destinations. We'll also add 
competition with our new planned service through Miami, to Rio, 
Caracas, Buenes Aires, and two other cities in South America.
    By connecting Pittsburgh to a larger national and 
international network, the United-US Airways combination will 
mean an exciting expansion of service to and from the region.
    In short, Pittsburgh will be a winner. As you know, aspart 
of the transaction, United has pledged there will be no furloughs of 
any USAir employees for 2 years following the closing of the merger. 
Beyond this promise, which is part of our merger agreement with US 
Airways, we have made a firm commitment with no time limit attached not 
to furlough any US Airways employee.
    We are also confident that our business will grow and 
create more opportunities and more jobs in the future in this 
region. We recognize that an important issue for Pittsburgh has 
to do with the construction of a new maintenance facility here.
    Our chairman, Jim Goodwin, has pledged that we will make a 
decision on that issue before the end of the month. We will, of 
course, advise you both and the community as soon as we 
determine what those plans will be.
    Senators, thank you for inviting me here today and for 
allowing me to discuss our transaction.
    Senator Specter. Thank you very much, Ms. Longmuir. I will 
now turn to Mr. Larry Nagin, executive vice president of 
Corporate Affairs and general counsel of US Airways since 
February 1996; bachelor degree in international relations from 
the University of Southern California; and a J.D. degree from 
the University of California, Hastings School College of Law.
    Thank you for joining us, Mr. Nagin, and we look forward to 
your testimony.

                    STATEMENT OF LARRY NAGIN

    Mr. Nagin. Thank you, Senator Specter and Senator Santorum. 
Good afternoon. We have had the privilege of appearing before 
you, Senator Specter. We have had the privilege of meeting with 
Senator Santorum on several occasions.
    I think you know the history of our company well, 
representing your Commonwealth here, as well as with respect to 
your duties in the Senate.
    I don't want to retread previous ground, but would like to 
respond to a few of the questions that have been raised not 
only by both of you Senators, but also by the preceding panel. 
And perhaps that will allow some further discussion on issues 
that are clearly important to both of you.
    We take your concerns very seriously. We don't give them 
short shrift. We're respectful of them. We think they're very 
legitimate questions that are deserving of being asked, and 
you're deserving of appropriate and responsive answers to test 
your comfort level and for you to make your independent 
    With that in mind, Senator Santorum, you mentioned you had 
some concern with respect to the size of the Pittsburgh hub. 
Just to put it in perspective, at Pittsburgh, US Airways and US 
Airways Express have on a daily basis in the month of July 605 
    Compare that with the Continental Airlines in Cleveland 
that has 435 departures; Continental at Newark, 585 departures; 
Continental at Houston, 607 departures, just two more than we 
have here in Pittsburgh; and United in San Francisco, 534 
    So I think just to name a few of the hubs in the country, 
Pittsburgh, for the size of its community, is second by only 
shy of two flights. It has a very significant hub here which 
we're very proud of.
    Second, Senator Specter, you made mention of a report of 
Saturday's Washington Post with respect to bonuses, as you 
characterize them. That article made reference to a public 
filing that US Airways made on Thursday afternoon before the 
Securities and Exchange Commission, which is the proxy to be 
reviewed by the SEC before it goes to shareholders to vote yea 
or nay on the merger proposal of United Airlines.
    And, indeed, that proxy was absolutely consistent with all 
of the previous proxies the previous 4 years with respect to 
the very important change in control agreements that the senior 
executives have at US Airways.
    All of them had been previously disclosed, number one and 
in some cases voted upon by shareholders. And, more 
importantly, it is an absolutely standard tool used in 
corporate America to attract and retain the best management 
    Without casting any aspersions on anywhere and anyone, I 
think you're all very familiar with the situation that faced 
USAir then in 1996, when Mr. Wolf joined the company. I think 
the press heralded his coming to the company as a savior, if 
you will, with respect to his track record in improving the lot 
of airlines throughout the country.
    He is a man with an impeccable record of 30 years of 
management in the airline business.
    As a result, USAir then was transformed into US Airways, 
and we reequipped the fleet, changed our image.
    And you will both remember all too well the very sad days 
we had here in Pittsburgh in previous years. It was a very 
difficult time with the Pittsburgh community being tremendously 
supportive of the company, and the company has paid that 
support back by growth and opportunities here in Pittsburgh 
that we're very proud of.
    By the way, Senator, with respect to those changes in 
control agreements, those were by an independent board of 
directors, an independent human resources committee, and indeed 
this entire transaction was approved by our independent board 
of directors and will go to our shareholders for their 
independent vote, consistent with what they believe to be in 
their best interests.
    And, again, these changes in the control agreements 
areconsistent with insuring fiduciary duties are met by executives 
throughout the United States.
    Finally, with respect to the future, the prior panel talked 
about the future of Pittsburgh. Both of you Senators have 
voiced great concern with respect to the new growth or the new 
    This transaction brings it to Pittsburgh by bringing United 
to Pittsburgh.
    I see my time is up. I'll be glad to respond to the 
questions on pricing and Q&A if you deem it appropriate, 
    Senator Specter. Let me take you up on the point as to the 
compensation here. To say that it's consistent with all of the 
practices on filing with the Securities and Exchange 
Commission, I understand that.
    When you talk about to attract and retain, we're really at 
a termination point. It's not a matter of attracting Mr. Wolf. 
He's there. It's not a matter of retaining him. In fact, it's 
counter retaining him. It's losing him.
    But in addition to the $11.7 million in severance, their 
additional annual retirement benefits of $87,000, there is an 
additional stock option, there is a commitment to pay all of 
the taxes from the stock option.
    And when you have a company where there is a suggestion as 
to whether, as a mature company, it can survive alone, and you 
have an issue as to so many commitments which United is 
making--and I appreciate the fact, I understand that this is 
commonplace. I don't think that justifies it, however.
    On a recent bank merger in Philadelphia, the CEO walked 
away with more than $40 million, but the question is why? What 
is the justification for it?
    Mr. Nagin. Well, there are two pieces to it. The 
justification, that is, I think, for the shareholders to make 
that determination and certainly you, Senator, in your position 
that you hold.
    But in terms of this transaction, anything that Mr. Wolf or 
any other executive, if you will, will realize from this 
transaction was the going in bid to bring and attract them to 
the company. And, indeed, there are two pieces to it, two 
components, if you will.
    One is the change in control component that deals with 
being removed or experiencing a change of control. Mr. Goodwin 
at United, I'm sure----
    Senator Specter. You mean Mr. Wolf is losing his job?
    Mr. Nagin. Well, I'm not suggesting that anyone should be 
concerned that Mr. Wolf is losing his job. Mr. Wolf----
    Senator Specter. He can take care of himself.
    Mr. Nagin. But if you weigh that against what is occurring 
with everything else here, in terms of its fiduciary duties, 
sir and Senator Santorum, every stockholder I think, is getting 
twice the current market value when the deal was announced.
    Senator Specter. I was just wondering, all of the things 
that are happening with Senator Santorum, who makes $141,000 a 
    Mr. Nagin. I never said things were fair, Senator, and I 
would never consider them to be fair. I think public service 
has its own benefits beyond monetary. Thank God there are 
people willing to do it.
    Senator Specter. You say it's not fair?
    Mr. Nagin. I wouldn't think it's fair, no. I think school 
teachers, librarians----
    Senator Specter. Never mind what Senator Santorum is 
earning. I'm more concerned about what Mr. Wolf is getting. Is 
that fair?
    Mr. Nagin. Is it fair? It's what is called for under the 
contract. Is it fair compared to the man on the street who is 
homeless? I would say absolutely not. Is it fair to a school 
teacher who should earn more? Probably not. Is it fair to a 
librarian? Probably not. Is it fair to other public servants? 
Probably not.
    But that is the way that it works. And the shareholders to 
whom Mr. Wolf owes a fiduciary duty, and that is the standard 
by which he is judged, if you will, are all fairing extremely 
well, to the point that our board of directors voted 
unanimously to approve this transaction, and we're hopeful that 
our shareholders will vote.
    But they are the ultimate arbiters. Just as the ballot box 
is the test for both of you, our shareholders are our test, as 
well as the courts and the Department of Justice.
    Senator Specter. I appreciate your candor with that long 
recitation to all of the people to whom it was not fair. And 
the shareholders are getting a big increase in the value of 
their stock, so they're happy because they're sharing in the 
unfairness, perhaps.
    But the question that is on my mind as a member of the 
Antitrust Subcommittee, a member of the Judiciary Committee of 
the U. S. Senate, is who is going to pay for it? Is it going to 
be paid for by the consumers somehow, who will have a reduction 
of service or increase in price?
    Will it be paid for by some of these employees who will not 
be furloughed but asked to move so far away they can't possibly 
take the job?
    Somebody is going to have to pay for it. Wouldn't you agree 
with that?
    Mr. Nagin. I'd agree with the macro statement somebody is 
going to pay for it, but that somebody is United Airlines. Sir, 
the benefit to United Airlines of US Airways joining their 
network is significant, or else they would not agree to do 
    The detriment to US Airways for not being able to join to a 
larger network is also significant. Because as was pointed out, 
we're the last of a rare breed of pre D regulation carriers.
    It is a complex issue, but United sees the benefit to offer 
this money. United is promising a job not for 2 years, but 
throughout for the employees of US Airways. And I think that's 
a big benefit that comes out of this.
    They're also pledging support to the communities. You know, 
I polled, if you will allow me, a list of the communities that 
US Airways serves of this Commonwealth. It's quite dramatic.
    And there are no barriers to entry to any of these 
communities, Allentown; Bethlehem, where you have a hearing on 
the 24th, sir; Wilkes-Barre; Scranton; Erie; Harrisburg; 
Philadelphia; Pittsburgh, of course; Altoona; Bradford; Warren; 
DuBois; Erie; Franklin; Williamsport; Johnstown; Latrobe; 
Lancaster; Harrisburg; Reading; State College.
    No other airline serves those communities like we do. And 
after this merger is approved, United Airlines will be there 
bringing the world to these communities. And they pledge not to 
decrease service. They've pledged not to reduce employment, and 
they have pledged price freeze.
    Senator Specter. Thank you very much, Mr. Nagin. I have 
decided not to ask you about your additional compensation. And 
if I had to decide to ask you about your additional 
compensation, I would have changed my mind after that very 
excellent answer. Whatever it is, you're worth it.
    Mr. Nagin. Thank you, sir.
    Senator Specter. Ms. Longmuir, just a couple of questions. 
I'll ask you to do this in writing, because I don't want to 
impinge anymore on the time here and yield to Senator Santorum.
    The structured fares, according to my information, 
constitute only 15 percent of fares of United, so that they're 
making a commitment for 2 years on structured fares. It doesn't 
seem to be very significant.
    If you'd care to respond now, you may. Senator Santorum has 
just given me the green light.
    Senator Santorum. I had that question, too, so you can use 
my time for the answer.
    Senator Specter. Answer that question on his time, and I'll 
go on to the next question.
    Will you give us an answer in writing on the issue of 
transfers and relationship to your commitment not to have 
    Ms. Longmuir. An answer in the sense that we will commit to 
no furloughs----
    Senator Specter. Well, what are the risks of those who have 
a commitment not to be furloughed to be transferred someplace 
which makes their job meaningless?
    Ms. Longmuir. What is the risk, sir? Our clear expectation 
is that we will not have to transfer anyone, because from a 
purely financial perspective, being one of those employees who 
has just been transferred for a happy reason from Washington to 
Chicago, it's tremendously expensive to the company, lost time, 
relocation, et cetera.
    Our whole underlying theme and benefit of this merger to 
United Airlines employee owners and stockholders is because 
it's based on growth.
    We are hoping to take the framework of the system that US 
Airways has built and to grow that dramatically.
    So based on a growth premise, we're hoping not to have to 
transfer anyone, because we have right now in this incredibly 
booming economy a shortage of people at every level within our 
    Senator Specter. Listen, I know United has to run a 
business. When you tell me you're hoping not to transfer 
anybody, it doesn't have a whole lot of meaning to me.
    To the extent you can be any more positive about it, and I 
know that the 17,000 Pennsylvanians will appreciate it.
    Final question I have for you is the business in writing. 
You and I talked about it in Philadelphia. Your CEO and I 
talked about it in Washington, as to the structured fare, as to 
the furloughs, as to the commitments to the international 
airport here. You heard what Mr. Roddey has to say, he wants it 
in writing.
    Ultimately, would United be prepared to back up what 
representations you make as a written commitment?
    Ms. Longmuir. Senator, our goal, truly, in becoming a more 
important corporate citizen within Pennsylvania is not to talk 
past either you or Senator Santorum, but to have a very 
positive relationship.
    We want to extend to you the reassurances that you are 
properly seeking on behalf of your constituents. So if the 
Department of Justice ultimately does not seek the fare 
commitment in writing, as we have discussed previously, as you 
have discussed with our CEO, we want to reach a way to 
accommodate and to address those concerns. And I know Jim 
Goodwin desires that very much.
    Senator Specter. Well, I take that last answer to be you 
talked right past me, but I'll try again in Allentown. Senator 
    Senator Santorum. Maybe I can get her to be more specific 
on that question. So what you're suggesting, if you're not 
required to put anything in writing by the Justice Department, 
you'll work to satisfy us in writing insome fashion, if that's 
    Ms. Longmuir. Well, I'd like to take a look, if I could, at 
the predicate behind writing to guarantee fares. It is, 
frankly, contrary to what we understand as a result of 
deregulation, that fares are not otherwise going to be 
mandated. We have tried, and perhaps this was a tactical 
mistake on our part.
    We attempted in offering the commitment to have a fare 
freeze for 2 years, except for an increase in CPI and fuel, to 
offer on good faith on behalf of the company, reassurance to 
the communities that we were coming in to serve, really pretty 
much as an unknown, that we recognize their concerns and 
anxieties and need for quality air service and, therefore, put 
that freeze in place.
    We plan on being in these communities for a very long time, 
so we certainly don't want to----
    Senator Santorum. How about with respect to the other 
issues, with respect to the facilities here, with respect to 
the issue--the employee issues? If those are not required in 
writing, would you be willing to give us something in writing 
about the facility here, the maintenance facility?
    You talked about the reservations jobs. Again, is there 
anything in writing that we will be able to receive?
    For example, I think we heard testimony from Jim Roddey 
today saying you would give us an answer on the maintenance 
facility by the end of the month.
    Ms. Longmuir. Correct.
    Senator Santorum. I assume that's something that we can 
have that we can count on that can be, in writing or have some 
sort of legal force that we can say, OK, well, they promised? 
Will we have something of that nature, or will it just be, 
well, hey, trust us, we're going to do this?
    Ms. Longmuir. I assure you on behalf of Jim Goodwin that 
you will have a decision that will be a bankable decision.
    Senator Santorum. OK; can you answer Senator Specter's 
question on my time now?
    Ms. Longmuir. Certainly; Senator Specter is absolutely 
correct that the fare freeze goes to 15 percent of the fares in 
place. But, however, that drives 40 percent of the revenue that 
is generated from the total revenue fare structure.
    The reason why we chose the point-to-point fare structure 
as a means to essentially drive and freeze fares was because we 
thought it was the easiest way for someone to monitor us, and 
it was the only, if you will, common thread that we could find 
in our fare structure.
    We have 750,000 fares in the marketplace today. We change 
on average 57,000 of those today. When there is a fare sell, 
that number goes up dramatically.
    But we were trying to find the largest basket, if you will, 
of fares to be driven and frozen, which is, to a great degree, 
the back board against which all other fares and fare sales 
emanate from.
    Senator Santorum. And so you have no intention of expanding 
that number, or is this something that's part of a negotiation, 
that you can have a broader number of fares that could be 
frozen over time? Or just to give--well, is there any thought 
of expanding that beyond the 15 percent that you suggested?
    Ms. Longmuir. No, there isn't, Senator Santorum, because we 
think that's fairly dramatic in itself, and as broad as we and 
our financial people could frankly come up with.
    Senator Santorum. A couple other questions about here in 
Pittsburgh. We talked about the reservations folks on Friday. 
We made our case on the issue of the maintenance facility. I 
know there are some people out in the audience that are 
dispatchers that are located here in Pittsburgh, and they have 
some concerns about what the futures of their jobs--these are 
the folks who, I guess, are the dispatchers systemwide for US 
    Has that issue been brought to your attention, and can you 
tell us if you have any announcements on that, or can you give 
us a timeframe of when we would know what the impact would be 
on those dispatching jobs here in Pittsburgh?
    Ms. Longmuir. I certainly appreciate your concern, Senator 
Santorum. This is the first time I have heard of this issue.
    Senator Santorum. I'm glad I brought it up then.
    Ms. Longmuir. But I know it is within a whole category of 
employee concerns and job groups that we are trying to address 
in a very methodical basis. And again I would underline that 
our desire and what is in our company and our employee owners' 
best interest is to lower the cost of operation through 
unnecessary transfers as much as possible.
    So we would hope not to have to dislocate or relocate 
    Senator Santorum. I understand that. Can you today give me 
some sort of timeframe of when you--these are issues that I 
would like to have resolved for me to feel comfortable that 
we're moving forward in a way that you suggested, which is that 
you want to be a partner here in Pennsylvania, and you want to 
be a good corporate citizen team player, as I think you--the 
corporate citizen aspect that you talked about 44 years ago in 
your statement when you came to Pittsburgh.
    We have folks here that would like to know what theirfuture 
holds, and if we could know that, obviously, as much in advance as 
possible, so you can put that on your list of things we'd like to have 
resolved, so we can have answers to make decisions by.
    Ms. Longmuir. I commit to you certainly to make that a 
priority, and we'll get back to you and to Senator Specter very 
    Senator Santorum. I appreciate that. Another question, this 
has to do with the maintenance facility. My understanding is 
the way the maintenance contracts were structured for the US 
Airways, and maybe, Larry, you can pitch in on this if you're 
aware, is that the new Airbuses were going to come in, but the 
engines were going to be privately contracted out. United 
doesn't do it that way. You service your own engines.
    My question to United would be assuming that all things go 
well here and that we build a new maintenance facility here in 
Pittsburgh, a United maintenance facility to service those 
aircraft, do you intend to continue to have those engines 
contracted out, or would those engines be serviced inhouse?
    Ms. Longmuir. I think that is something that is internally 
being reviewed, Senator, which we would be able to give both 
you and Senator Specter definitions before the end of the 
    Senator Santorum. OK; that was my question. I just wanted 
to make sure that that component of the discussion was also 
included in our answer by the end of the month.
    Senator Specter. Thank you very much, Senator Santorum. 
Thank you Ms. Longmuir and Mr. Nagin. Appreciate your being 
with us.
    Senator Specter. Coming now to panel three. Mr. Glenn 
Mahone, Kent George, Dr. Lowell Taylor, Mr. Tony Fratto.
    Our first witness here is Mr. Glenn Mahone, chairman of the 
Allegheny County Airport Authority, bachelor's degree from Penn 
State and J.D. from Duquesne. Also holds an LLM from Yale 
University. He served as bond counsel underwriter and insurance 
counsel across the broad range of State and municipal authority 
transactions. Thank you for joining us. Do you pronounce that 
    Mr. Mahone. I'll respond to both, Senator, but it's Mahone.
    Senator Specter. Mahone. The floor is yours, Mr. Mahone.


                   STATEMENT OF GLENN MAHONE

    Mr. Mahone. Thank you, sir, and thank you Senator Santorum 
for convening this important forum. With me today is Kent 
George, the executive director of the Authority.
    We would first like to thank you and the committee for the 
opportunity to present our views on the pending purchase of US 
Airways by United Airlines.
    Second, Mr. Jim Roddey, county executive of Allegheny 
County, testified earlier on this region's position on the 
acquisition of US Airways by United Airlines.
    The airport authority completely supports Mr. Roddey's 
testimony and encourages your committee's inclusion of this 
region's desires in your report.
    The Allegheny County Airport Authority operates the 
Pittsburgh International Airport, which provides the businesses 
and residents of Southwestern Pennsylvania, Eastern Ohio, and 
Northern West Virginia their access to the world.
    The airport authority is in the enviable position of 
operating one of the world's most modern facilities that is 
capable of immediate expansion within its 10,000 acres.
    Pittsburgh International is this country's 25th largest 
airport in passenger traffic and was recently ranked number one 
in the United States and third in the world by readers of Conde 
Nest Traveler Magazine.
    In short, Pittsburgh International Airport offers the 
world's airlines an unrestrained, unrestricted, efficient and 
effective facility to meet their current and future needs. The 
airport authority stands ready to meet not only US Airways and 
United's needs, but also the needs of any other carrier 
desiring access to this region.
    Again, thank you for this opportunity. Both Mr. George and 
I will be ready to answer any questions you may have.
    Senator Specter. Thank you very much, Mr. Mahone.
    We now turn to Mr. Kent George, executive director of the 
Allegheny County Airport Authority, undergraduate degree in 
aviation management from Emory Riddle Aeronautical University, 
and a master's degree in business administration from St. 
    Thank you for joining us, Mr. George, and we look forward 
to your testimony.
    Mr. George. Thank you, Senators, and in the interest of 
time, we've done a joint testimony for the airport authority, 
and you can move on, and we'll answer any questions that we'll 
be able to--no need to repeat everything we've gone through 
    Senator Specter. You are in jeopardy, Mr. George, of 
becoming the most popular man at this hearing.
    Mr. George. I've done this a few times before, Senator, and 
I know how much you enjoy sitting there.
    Senator Santorum. No, I really do enjoy it.
    Dr. Lowell Taylor is professor of economics at H. John 
Heinz, III, School of Public Policy and Management at Carnegie-
Mellon University, on the faculty there since 1990; a master's 
degree in economics and statistics and a Ph.D. in economics 
from the University of Michigan; Senior Economist of the 
Council of Economic Advisors in the Executive Office of the 
President earlier this year.
    Thank you for joining us, Dr. Taylor, and we look forward 
to your dispositive testimony. With that resume credential----


    Mr. Taylor. It's my pleasure, Chairman Specter and Senator 
    Senator Specter. How are you so young, by the way, Dr. 
    Mr. Taylor. How am I so young? I wish my kids were here to 
hear you say that. They would sadly disagree with your 
    I have some issues I'd like to raise about the antitrust 
and competition, questions about the merger of US Airways and 
    Let me start by saying that the proposed merger does appear 
to make some economic sense. We have US Airways in the east 
that has a large network and Pittsburgh, of course, anchoring a 
    And, in addition, there is this large east-west United 
system of routes and the international system. And Pittsburgh 
travelers would enjoy this link to one-stop service, as has 
been mentioned many times, to destinations in Asia and Latin 
    Although there may be considerable value to Pittsburgh in 
being a key hub in such a nationally and internationally 
prominent airline, there are certain aspects of the proposed 
merger that should make Pittsburgh residents nervous.
    And here I'm actually just reiterating the concerns that 
were mentioned by Hon. Mike Fisher and questions that you 
raised yourself, Senator Specter. The issue is with pricing.
    Let me pass over some of my academic discourse and head 
straight to the table, which I think is most relevant. I hope 
you have the testimony there, because I'm going to be referring 
to Table 1.
    Do you have extra copies that you could hand to the 
Senators that they could take a quick look at?
    Senator Specter. Dr. Taylor, why don't you describe the 
table and what it's worth.
    Mr. Taylor. I'll describe what I have, and then perhaps we 
can get a table, too, as we go. My concern is about the average 
fares that we pay in and out of Pittsburgh. So what I did is to 
pull together data from the U.S. Department of Transportation 
for a list of airports that have the following features.
    They are all airports that have an average passenger 
distance that is very close to Pittsburgh's. So, for example, 
the average passenger coming to or from Pittsburgh happens to 
travel 882 miles. I picked airports that have that same 
characteristic, that is to say, they have an average distance 
close to that 880 figure. Actually, it's plus or minus 30 
    And what I've done here is to consider only top routes. 
These are only for fares that are for the top thousand routes, 
between--typically between major cities.
    So for Pittsburgh, for example, these are routes as it 
turns out between Pittsburgh and Washington; Philadelphia; New 
York; Atlanta, Georgia; Tampa, and so forth.
    And what you notice is that the anecdotal evidence that 
people have brought before you is correct, that people who fly 
in and out of Pittsburgh do pay considerably more than people 
flying out of other airports.
    Let me emphasize, this is not because the flights out of 
Pittsburgh are for shorter East Coast hops. These are all 
comparable apples to apples. And it's not because they're 
serving especially smaller markets, because these are only for 
the top 1,000 flights, that is, only for the largest routes.
    Pittsburgh, you will notice, we pay about 50 bucks a fare 
more each way. You're wondering where $12 million might come 
from. This is for only one quarter. There is a million 
passengers here, each paying about $50 more than they'd pay to 
come out of other airports. That's a lot of money.
    If you split the page and look at table 2, you can see this 
issue broken down by eastern markets, eastern destinations, 
Midwest, Florida destinations, west and southwest.
    Let me just, in the interests of time, draw your attention 
only to the panel which is the eastern destinations, and then 
I'll compare that with the bottom panel, which is to the west 
and southwest.
    In the east, US Airways has a huge market share. If you 
want to fly to Washington or Philadelphia, you have virtually 
no choice but to fly on US Airways. And you'll notice that the 
average fares on those particular routes are far higher than 
the median fares for comparable markets.
    If you're flying to the west in contrast, US Airways does 
have a large market share, but not merely as dominant. And 
interestingly enough, the air fares are much the same out of 
Pittsburgh as they are for other similar comparable markets.
    The answer as to why this is, I think, is given by the 
chart that you have behind you, Senator Specter, and it's just 
simply the issue of market shares. This is what we would 
typically expect of firms that develop a large amount of market 
powers. They can use that to charge higher prices.
    I think that the antitrust division of the Justice 
Department will be, no doubt, carefully examining the effects 
of the proposed merger on the competitiveness on a number of 
routes, including the ones I'm sure that I have outlined for 
you here.
    I hope when they do that, they try to focus on Pittsburgh 
specifically where we really do have a serious issue already 
with large market share.
    The chairman and CEO of United Airlines has proposed a 
remedy in Reagan National Airport specifically for concerns 
about the market share that this merger would create there. And 
one thing that perhaps would be worth discussion would be 
whether or not, in the process of forming this merger, similar 
issues might be taken up at Pittsburgh.
    That concludes my testimony. Thank you again for the 
opportunity to speak.
    Senator Specter. Thank you very much, Mr. Taylor. We'll 
come back to you for questions in just a moment or two.
    We turn now to Mr. Tony Fratto, the Public Affairs Advocate 
for the Pittsburgh Technology Council. From 1991 to 1995, he 
served as press secretary and legislative assistant to 
Congressman Rick Santorum, now Senator.
    He went on to serve as communications director for Senator 
Santorum through 1997 to 1998. Graduate of the University of 
Pittsburgh, a native of McKees Rocks, PA.
    I thank you for joining us, Mr. Fratto, and we look forward 
to your testimony.

                    STATEMENT OF TONY FRATTO

    Mr. Fratto. Thank you, Senator Specter, for having me here 
today and Senator Santorum. I appreciate the opportunity to 
address this issue and also thank you for your sincere and real 
dedicated, persistent efforts on economics development in this 
region. It's greatly appreciated.
    May I ask that my testimony be entered into the record.
    Senator Specter. It will be, with no objection.
    Mr. Fratto. I'll withdraw my comments, but we thank you 
again, appreciate this opportunity. You may know that I also--
you mentioned the Pittsburgh Technology Council. I also 
directly represent the Greater Pittsburgh Chamber of Commerce, 
the Pittsburgh Regional Alliance, and the Allegheny County 
Conference on Community Development, and a number of other pro 
business and economic development groups in Southwestern 
Pennsylvania, which puts me in a unique position to represent 
the views of that community at this hearing.
    The health of Pittsburgh International Airport is really 
vital to the business and economic development interests of our 
region. Clearly, the airport provides thousands of jobs for our 
community and provides support for countless families.
    And also for, really, millions of people, it provides often 
at least the first look to our wonderful region, sometimes the 
only look into our region. So the health of that asset is 
extremely important.
    None of the groups I represent at this time have staked out 
a formal position on the merger. They're in the information 
gathering stage, trying to educate their membership, as many 
folks in this room are doing the same. However, they expect to 
take formal positions shortly.
    Some consensus on some key points has emerged, though, and 
looking at the merger, first among them is the prospect of 
increasing the number of flights to this region.
    One-stop flights and direct flights both domestically and 
internationally is vitally important to this region. Both you, 
Senator Specter and Senator Santorum, and a number of others 
were heavily involved in our region's effort to reinstate the 
London to Pittsburgh route to Pittsburgh.
    You know the effort that went into that effort to gain just 
one flight. So I know you recognize the importance of adding 
these flights.
    In particular, especially to members of the technology 
community in Pittsburgh, nonstop flights to Portland, OR, and 
San Jose are very important, and also one-stop flights to Asia 
are also very important.
    The second area of consensus that's emerged is the 
maintenance and expansion of hub status for our airport.Most of 
the jobs related with Pittsburgh are--available in Pittsburgh are 
related to our status as a hub airport. You want to put your people in 
airports that are hubs.
    So we strongly support that.
    Each of our groups strongly encourages United Airlines to 
follow through with US Airways' commitment to build a 
maintenance facility in Pittsburgh. We think this is absolutely 
    As someone who grew up in western Allegheny County, I know 
the impact of those maintenance jobs in our community and the 
importance to our region that that has. We know that they're 
studying their options right now. We hope that United follows 
through and is able to give us that commitment.
    Finally, I know this was mentioned earlier, and again by 
Dr. Taylor, within the Pittsburgh business community, no issue 
is certain to raise the ire, when you talk to business flyers, 
than the cost of flying out of Pittsburgh International 
Airport. It is absolutely one of the highest areas of concern.
    I hope that as we look at the merger, that we can also look 
at opportunities to provide more reasonable pricing for some of 
these flights.
    Now, as I note in my testimony, this puts me as an advocate 
for business, this puts me in a curious position of objecting 
to a private company's right to charge what the market will 
bear. That being said, airports are unique business entities, 
and we hope that some action can be taken in that area.
    I'll stop my testimony there, and I'm prepared to answer 
any questions you might have.
    [The prepared statement of Mr. Fratto follows:]

                   Prepared Statement of Tony Fratto

    Good Afternoon Chairman Specter and Senator Santorum.
    My name is Tony Fratto and I am the Vice-President of Government 
Affairs for the Pittsburgh Regional Alliance.
    Thank you for giving me this opportunity today to address concerns 
related to the proposed merger of US Airways and United Airlines.
    I also would like to thank you both for your sincere and persistent 
attention to economic development issues affecting our region. Whether 
there is a crisis or an opportunity, we have never had to knock on your 
doors, because your doors have always been open to us.
    Also, the leadership of Allegheny County Chief Executive Jim Roddey 
has been instrumental in dealing with this issue. We could not be more 
pleased with his energetic and thoughtful representation of our 
interests and we stand enthusiastically with him.
    As you know, I represent the Pittsburgh Regional Alliance--the 
prime business attraction and marketing group in the Pittsburgh region; 
the Greater Pittsburgh Chamber of Commerce--our chief business advocacy 
group; the Pittsburgh Technology Council--the largest regional 
technology trade group in the nation; and the Allegheny Conference on 
Community Development--the leading corporate civic group in our region. 
By extension I also represent other pro-business, economic development 
groups in southwestern Pennsylvania.
    In fact, as a shared employee of these groups, I am in a unique 
position to outline the concerns of the business community and the 
greater economic development community in our region.
    The health of Pittsburgh International Airport is vital to the 
business and economic development interests of southwestern 
Pennsylvania. The airport provides important links for our business 
community and jobs for thousands of families. For hundreds of thousands 
of air passengers every year, the airport provides the first--and often 
the only--window into this wonderful region of ours. Clearly, for the 
business and economic development communities of southwestern 
Pennsylvania, the airport is a preeminent asset that should be both 
protected and allowed to flourish.
    I should be clear in nothing that no group I represent has taken a 
formal position either in support or in opposition to the proposed 
merger of these airlines. However, as you can imagine, news of the 
merger has sparked significant discussion and debate. At this time, 
each group is in the process of gathering information, educating boards 
and membership, and analyzing key data. These groups can be expected to 
take formal positions in the near future.
    However, in discussions of the merger, agreement is clear on 
certain significant points that I am pleased to outline for you today:
    The prospect of increasing the number of direct and one-stop 
flights to domestic and international destinations from Pittsburgh 
International Airport presents a significant opportunity for our 
region. Even in the ``New Economy'' there is no substitute for 
efficient person to person contact in the business world. Our business 
community places great value on the ability to fly to key destinations. 
Our recent prolonged, but successful, fight to reinstate a direct 
Pittsburgh to London route is an excellent example of the importance we 
place on flight access. The proposed merger is expected to result in 
significant new flight opportunities--including destinations of high 
interest to the high tech community like San Jose, CA; Portland, OR; 
and Asia. We strongly support increased destinations and encourage our 
political leaders not to ignore the tangible benefits of these assets.
    The maintenance and expansion of ``hub'' status for Pittsburgh 
International Airport is essential to our economic development efforts. 
While there are costs as well as benefits associated with hub airports, 
we all agree that the benefits outweigh the costs and stand strongly in 
support of retaining this status for Pittsburgh. United Airlines has 
publicly stated that they intend to expand and grow Pittsburgh 
International as a hub airport. We are hopeful that United is sincere. 
Increased flights and the preservation of jobs across the board are 
directly tied to our status as a hub airport. The costs associated with 
hub status have mainly to do with pricing, and I will address that 
issue later.
    Each of our groups strongly encouraged United Airlines to build a 
maintenance facility to accommodate the new Airbus jets at Pittsburgh 
International Airport. Without question, no other issue has been 
addressed with more concern or less information. Our local, state and 
federal political leaders, as well as labor and community leaders have 
all joined in unanimity in attempts to get this deal done. United 
Airlines is currently studying their options. We join with you, Senator 
Specter and Senator Santorum, our congressional delegation. Governor 
Ridge and Chief Executive Roddey, and all concerned parties in voicing 
our strong support for a positive decision on this issue. Speaking 
personally, as a resident of western Allegheny County all my life, I 
know what the economic impact of losing these maintenance jobs will 
mean to the viability of communities in that region. We must all be 
supremely diligent and persistent in affecting a positive outcome on 
this decision.
    I earlier mentioned pricing as a cost which mitigates the benefits 
of being a hub airport. Within the Pittsburgh business community no 
issue is certain to elicit more testimonials of outrage than the cost 
of flying from Pittsburgh International Airport. In the interest of 
decorum I have omitted some of the more colorful remarks in relation to 
this issue, but such descriptive adjectives as ``outlandish,'' 
``outrageous'' and ``usurious'' are among the more frequent. We all 
recognize that higher ticket prices on certain routes is the price we 
pay for maintaining flight access. And the business community is 
willing to pay a premium for that benefit. As an advocate for business 
I am put in the curious position of objecting to a private company's 
right to charge what the market will bear. But clearly some effort must 
be made to reduce the size of the premium local flyers are forced to 
    Finally, any assessment of this merger must include an analysis of 
US Airways' future prospects as a healthy and successful enterprise in 
the absence of joining with United Airlines. It has been no secret that 
US Airways has struggled to be consistently profitable due to a wide 
range of factors--not the least of which is the high operating costs of 
Pittsburgh International Airport. An objective conclusion could be 
reached that US Airways' ability to compete on its own in the current 
airline industry is precarious. If this airline were to collapse, the 
negative economic impact to the region would be catastrophic and far-
reaching. Speculation as to the benefits or detriments associated with 
the proposed merger might require a necessary leap of faith when viewed 
in this light.
    Business and economic development groups in southwestern 
Pennsylvania cooperate to an extensive degree--expecially when issues 
of such overarching importance as this proposed merger arise. I can 
assure you that we will continue to fight to see that the region's 
interests are advanced.
    Senator Specter and Senator Santorum, thank you again for holding 
this important hearing and for giving me the opportunity to address 
these issues. At this time, I am available to answer any questions you 
may have.

    Senator Specter. Thank you very much, Mr. Fratto.
    Dr. Taylor, we'll start with you. You say, obviously 
accurately, that the market power on the increase enables the 
charging of higher prices, but there's already a large market 
share, and that's a matter that should be inquired into very 
closely by various governmental agencies or committees of 
    Could you expand upon that? Just how do those 
generalizations apply to this proposed merger?
    Mr. Taylor. Well, what studies have generally shown is that 
when an airline gains a market share somewhere in excess of 70 
percent on a particular route, that that's where things start 
to get dangerous, that that becomes close enough to a 
monopolized power that they're able to raise hairs about what 
the otherwise competitive level would be.
    Frankly, my understanding is that when the antitrust 
division of the Justice Department looks at a merger like this, 
what they first focus on is the way in which it increases 
market share on particular routes.
    Now, in the case of United and US Airways, there aren't 
that many routes out of Pittsburgh where they do compete head 
to head. I know there is a Chicago route and some flight to 
Dulles that would compete on the Washington routes, but mostly 
US Airways dominates that.
    So I don't think that's so much the issue. It's just when 
you look at this issue from Pittsburgh's perspective, you sure 
wish that we could somehow figure out a way to get a little bit 
more competition, especially in the east.
    And this seems like it's a step kind of in the wrong 
direction. Because instead the merger with United worries me 
now that instead of having--it's certainly not going to reduce 
the competition in the east. And it worries me that it's going 
to reduce the competition a little bit going to the west, where 
we already are in better shape.
    I have no idea, I have seriously no idea what the Justice 
Department could do about this if they decide to approve this 
merger or if they recommend to the Department of Transportation 
to approve this merger.
    It's possible they could negotiate or that you, along with 
the regulators, could negotiate with United and US Airways some 
divestiture here in Pittsburgh similar to what they've already 
offered out of Reagan National, but again that's speculation on 
my part.
    Senator Specter. Mr. George and Mr. Mahone, you're 
operating as a tag team here. What suggestions would you have 
to try to bring other carriers in, and how can you attract 
Southwest to fly to Philadelphia out of Pittsburgh? 
Hypothetically I was about to say, but it's not a bad idea.
    Mr. Mahone. Mr. George was asking me a question, also.
    Senator Specter. Come up on the panel, Mr. George, if 
you're going to ask questions.
    Mr. Mahone. Mr. George, why don't you begin.
    Mr. George. We believe that you must continue to bring in 
competition, and the only reason those fares are high is 
because we don't have competition on it. We've actively gone 
after a number of different carriers, and we are talking with 
carriers. US Airways has not tried to dissuade us from that.
    Senator Specter. Do you have gates to put them at if you 
get them?
    Mr. George. Yes, sir, we do. I talked with your staff. We 
have 75 total jet gates at the airport right now. We control 
ten of those gates. Fifty of those gates are leased to US 
Airways, the rest were leased to a number of other carriers, 
some of them exclusive.
    But we do have control, and we have the capability to 
handle both international and domestic flights and expansion. 
The facility is uniquely positioned, also, that within 
construction time, we can put 25 more gates on.
    Additionally, the turns on the gates are a little bit below 
the average turns.
    Senator Specter. Moving away from the gate issue, what are 
the considerations on bringing in another carrier?
    Mr. George. Well, I think it's more the consideration on--
    Senator Specter. A few years back TWA competed with then 
USAir, even then Allegheny on the Pittsburgh to Philadelphia 
route. What happened with TWA, if you remember, or if you knew?
    Mr. George. No, I didn't know that. I wasn't here then at 
that time. But we brought in two new carriers--well, one new 
carrier, Pan Am, has begun service at Pittsburgh, and they're 
running about six flights a day out of here, 12 flights a day.
    Senator Specter. To Philadelphia.
    Mr. George. Not to Philadelphia. We're talking to them both 
about Philadelphia and about Harrisburg. And a vanguard has 
begun additional service not only to Chicago, but they started 
flying to both Atlanta and Myrtle Beach, and immediately the 
price came down.
    And we're talking with three or four other carriers. We, 
like every other airport in the country, have talked to 
Southwest. We've talked with Jet Blue and also Air Tran about 
coming in and providing some competition.
    Senator Specter. Are there any prospects currently to find 
an airline to come in to fly to Philadelphia from Pittsburgh?
    Mr. George. No, not at this time, we don't have them. Pan 
Am is talking to us about both Philadelphia and also 
Harrisburg, but there has not been a commitment made yet.
    Senator Specter. Mr. Fratto, do you expect that the 
business community will take a formal position on this proposed 
    Mr. Fratto. Yeah. I expect that they will. I mean, and just 
to add to Mr. George's response, actually the business 
community has probably as much fault in this situation as any 
other group.
    We think of US Airways rightly so as a local company. We 
know that they're headquartered in northern Virginia. But with 
a number of jobs in Pittsburgh and their corporate presence 
here, we think of them as a local company, and certainly the 
corporate world thinks of them that way.
    When competition is brought in and prices do come down, 
ordinarily the business community has seen competitive prices 
at US Airways, has always gone back to US Airways and has not 
helped competing airlines compete in our market.
    I don't know that they've recognized this in the past that 
that's the way it works. But they need to participate in that 
effort, if there is going to be any effort to bring down the 
    If they're comfortable with US Airways or it becomes 
United, there is nothing anybody can force them to do, but they 
have to look at the macro picture here in how competing 
airlines will affect the prices in this market.
    Senator Specter. Thank you, Mr. Fratto. Senator Santorum?
    Senator Santorum. Tony brings up a good point, and I think 
in many respects I am a typical Pittsburgher. If I have a 
chance to fly US Airways or United, I fly US Airways. If I have 
a chance to fly US Airways or any other airline, I fly US 
Airways. Because I try to support the local folks.
    And maybe that results in less competition. I don't know. 
But, you know, I think we out here in Southwestern 
Pennsylvania, you know, are very loyal, and we're going to 
support our own hometown folks.
    And that probably is in some respects it's a great, 
wonderful quality, but it doesn't help you expand the 
competition if you're not going to fly to other airlines.
    Is that----
    Mr. George. That's very correct, Senator. What happens is 
that a vanguard will come in. They'll drop their fares. US 
Airways will, of course, automatically match them. But like 
you, I have my frequent flyer miles with US Airways.
    And what we have to do is convince the business community 
and the people to fly on the vanguard, fill up their seats, 
then go to US Airways, because the minute the vanguard doesn't 
make money and leaves is the minute US Airways is going to 
increase their prices again.
    Senator Santorum. Dr. Taylor, looking at your chart here, 
which shows Pittsburgh as higher than any of these other 
comparable areas, I see only three of those long list of cities 
are also hub airports.
    Mr. Taylor. Right.
    Senator Santorum. It would be Chicago, Detroit, and 
Washington. If you run a similar analysis on looking where we 
are with respect to hub airports, number one, number two, why 
do you think Pittsburgh is so much higher?
    Mr. Taylor. Well, you almost answered your question. The 
hub aspect really does matter a lot. If we were to do this same 
analysis for all airports across the country, what you discover 
is that, you know, having already taken account of the 
passenger distance--that's obviously going to matter. The 
longer the passenger distance, the higher the fares.
    But having taken that into account, people flying out of 
hubs do pay more. This is true generally. People out of 
Cincinnati pay more, people out of Dallas or St. Louis.
    So part of this is the hub. But, of course, that's exactly 
the whole point of this antitrust issue. The folks at antitrust 
and the Department of Justice are really worried about this, 
because the hub and spoke system is an efficient model. It's a 
good business model.
    But what it can do is when it runs amuck, it can give one 
airline simply too much power out of one airport, and then 
there is not that much that can be done about it.
    The kind of behavior that Mr. George talked about is 
illegal, but it's not generally prosecuted.
    Senator Santorum. OK; just even looking at those cities 
that are hubs, we are higher than anybody else. Is there any 
other particular reason, if you would look at other hubs, why 
Pittsburgh is highest?
    Mr. Taylor. I don't have a definitive answer, but I can 
give you a guess. If you look at the other hubs, Detroit, 
Chicago, and you mentioned Washington, none of them have 
anywhere near as high a dominance of one airline as does 
    Actually having done this for your committee, I'm going to 
use this for my class this fall when I talk about monopoly and 
just ask them the question, based on market shares, which would 
you predict to have the highest fares? And it will be 
Pittsburgh because of the extremely high market share that US 
Airways holds.
    Senator Santorum. Can I maybe throw another factor in that 
at least leads me to think maybe one of the reasons we're 
higher, Kent, what percentage of the passengers flying out of 
Pittsburgh originate in Pittsburgh, originate or end up in 
    Mr. Taylor. These are all--I don't know the answer to your 
question, but just to clear up the analysis, this is all point-
to-point service.
    Senator Santorum. I understand that. That's not the 
question but----
    Mr. George. About 30 percent to 35 percent.
    Senator Santorum. What is average for a hub?
    Mr. George. It depends on their O&D market, and in Chicago 
it's huge, but in Atlanta it's huge.
    Senator Santorum. How about Detroit?
    Mr. George. I don't have that answer, but in Charlotte it's 
about like us or a little bit less. Charlotte has high fares, 
also. But you have the trade-off. We have access to the world.
    Senator Santorum. I guess the point I'm trying to make is 
when I look at these other cities that we're compared with 
here, and I don't know Detroit, but I certainly know Chicago 
and Washington. We have a much higher percentage of the 
traveling public going to those airports that originate in 
those cities.
    So I would think that that would have an impact on the cost 
of the fares, because you're getting a lot of through traffic 
as opposed to origination traffic. Maybe? Maybe not? Yes? No?
    Mr. Taylor. It's unclear to me why having through traffic 
should make the fares coming out of Pittsburgh higher. So when 
I fly to Washington, as you do on US Airways, I'm sure, we're 
sitting along with people who have come from Erie and over from 
Detroit and who knows where alongside us.
    Senator Santorum. Why don't you talk to some people in the 
airline industry and see if they can give you a reason as to 
why having through traffic as opposed to origination adds to 
the cost? Because that is something that I have heard a concern 
about this hub.
    And one of the big concerns I have about this hub is the 
fact that we have a very small percentage, relatively speaking, 
to other hubs of originations, and that that does have an 
impact on the cost structure of the airline operating out of 
that hub.
    Mr. George. They charge what they feel that they can 
charge, Senator, and what they come through with, when these 
planes are literally 70 percent full when they come through 
here through the hub, and that's what makes it so efficient, 
when the local O&D traffic is sitting here, they're going to 
charge what the local market will bear.
    And if they lose some of that, in our case it's to 
Cleveland or Columbus, or in some cases even to Baltimore, MD, 
outside of our catchman area, when they lose that, they're not 
losing money, because everything is incremental over and above 
that 70 percent.
    Mr. Mahone. I would add to that, Senator, that we've been 
beating around the bush quite a bit, but I think the critical 
component of what has created the situation here in Pittsburgh 
is simply market dominance. Without that these fares would not 
be as high as they are.
    And when you look at other carriers and invite them to come 
in and deploy their assets against a monopolistic situation 
like Pittsburgh, it's just not attractive.
    Senator Santorum. I guess I understand. I guess a couple of 
comments--I know my time is up, but Senator Specter is a very 
patient man--you're describing to me the current situation, and 
I'm looking at an increase in dominance of about 2 percent as a 
result of this merger in Pittsburgh, not what I would consider 
to be particularly substantial.
    And so, again, I come back to the question how does this 
adversely affect Pittsburgh? I understand it doesn't get any 
better, but how does it adversely affect Pittsburgh?
    And I almost feel in some respects when we're talking about 
fares coming out of Pittsburgh, we're the guy living in the $2 
million mansion in Fox Chapel complaining about our property 
taxes. I mean, you've got a $2 million mansion here. I mean, 
it's a nice place. You've got great service, you've got all of 
these things, and we're complaining how much it costs. Well, 
then, you know, build a smaller house.
    I mean, but we have a big house here. We've got a big 
airport. And it's very expensive. And if we don't have a lot of 
people coming in and out of here, in other words, if we don't 
have a hub, we've got no way to pay these bonds. Okay?
    So I understand the complaints about fares, but I also 
understand, you know, this county spent a billion bucks 
building this thing for one reason. They wanted a hub. Eyes 
wide open as to what that meant with fares.
    Mr. Taylor. I think you make an excellent point. So the 
answer to your question is the 2 percent doesn't strike me as 
making a real big difference, except possibly on specific 
    And it really is fair for you folks and for the folks at 
Justice to pay attention to those specific routes, so to 
Chicago, for example, to Washington, for example. And, you 
know, from our perspective, well, 2 percent, that's not a big 
    It would be kind of nice to be going 2 percent in the other 
direction. So maybe, as part of the merger discussions, US 
Airways and United could say, all right, let's see if we can't 
do something better for Pittsburgh.
    First of all, there is the issue of the maintenance 
facility, which you correctly point is a very important issue. 
And then maybe they could do something along the lines of what 
they're doing at National to bring in additional competition. 
But I agree with your point completely, and you're exactly 
right, two percent.
    Senator Specter. Thank you very much, Mr. Mahone, Mr. 
George, Dr. Taylor, Mr. Fratto.
    Senator Specter. We now move to our final panel, Mr. Frank 
Schifano, Ms. Christine Fox, and Mr. David Guerriero.
    Our first witness is Mr. Frank Schifano, currently the 
president and chairman of the International Association of 
Machinists, Local Lodge 1976, serving his third term as 
president and chairman. He represents approximately 2,800 
mechanics and related members at the Pittsburgh International 
    Welcome, Mr. Schifano, and we look forward to your 



    Mr. Schifano. Thank you, Mr. Chairman and Senator Santorum. 
Thank you for having us here today. I guess this is a benefit 
to going last. We got to hear what everybody else had to say 
about us.
    There has been a lot of testimony regarding how the 
proposed merger will affect competition and the service to the 
traveling public. Those areas are important, and I believe they 
must be addressed.
    But in my testimony today I would like to discuss the 
effects on employees of both United Airlines and US Airways.
    International Association of Machinists and Aerospace 
Workers represents nearly 67,000 employees on both carriers. 
Our international president has instructed our legal department 
to closely examine the proposal and the impact on our members 
before we will make a decision as to whether to endorse or to 
oppose the merger.
    We have many concerns including a fair and equitable 
contract, job security, and where will these jobs be located, 
as we talked about and had heard many discussions today on.
    I appear before you today representing the mechanical and 
related group at the Pittsburgh International Airport. 
Pittsburgh is US Airways' largest maintenance center in the 
United States, and our concern is for its future.
    Even though there has been testimony by United officials 
that would protect jobs, the uncertainty of where those jobs 
are for the IM members of both airlines is a concern of ours.
    For 2 years we've been working on a project to build a new 
state-of-the-art maintenance facility in Pittsburgh, as we 
discussed. We have the support of the Federal, State, and local 
elected officials, along with business, community leaders, and 
labor leaders, also.
    We believe this facility in Pittsburgh would make good 
business sense, but would also bring stability to the 
Pittsburgh region and would also stabilize United's system.
    My belief is that United employees are as concerned with 
the seniority of our members and the ability to be displaced as 
our members are as to have to exercise that seniority.
    The IM understands that there is great potential for future 
growth and job security, but our members in both United and US 
Airways must be assured of this, and we believe that Pittsburgh 
could be the key to this whole puzzle.
    With that said, I would like to thank the chairman for the 
opportunity to testify before you today.
    Senator Specter. Thank you very much, Mr. Schifano.
    We turn now to Ms. Christine Fox, elected in June of this 
year to serve as president of the Communication Workers of 
America, Local 13302 in Pittsburgh.
    She's worked for US Airways for 32 years. Local 13302 
represents agents of the Pittsburgh Airport, Pittsburgh 
Reservation Center, and agents of the Baggage Call Center, 
which includes 1,700 union members from the Western 
Pennsylvania area.
    Thank you for joining us, and we look forward to your 


    Ms. Fox. Thank you. First of all, I want to thank you for 
this opportunity to address the committee. You have some very 
important issues regarding this merger.
    My name, of course, is Chris Fox. I'm the president, 
recently elected, so I'm new at this. You have to forgive me.
    Our membership consists of what we term inside or the 
public contact workers. These are the gates, ticket counters, 
the club representatives, the special assistance workers, all 
of those people that you see when you go through the airports, 
as well as when you use the city ticket offices.
    We also represent the Baggage Call Center, which is not 
public, but when you have a problem with your bags, that's who 
you talk to, and our reservation center.
    Now, our reservations centers are very diversified. We have 
specialty desks. We have an international department in 
Pittsburgh, as well as the dividend miles awards, part of the 
reservations. So there are a lot of specialty job functions, as 
well as just making regular reservations.
    We also represent Erie--we can't leave them out--Erie, 
Pennsylvania, and then our other local is the Philadelphia 
local, 13301. It's in the process of being established with 
their local officers, and there's about 700 people there.
    So although we don't represent the clerical, the trainers, 
the various persons at administrative representatives, we are 
concerned for them. We want their futures and their job 
security here in Pittsburgh, as well.
    Many of the jobs at United and USAir are--they share a 
common day-to-day operation so mentioned like the dispatchers 
earlier. We have the same, similar situations in a lot of our 
administrative work in the Pittsburgh area.
    These jobs involve industry-specific skills, which if 
something were to happen and these people did not have these 
jobs here, it would be hard for them to go out in an entry 
level position and get a job that pays comparable, has the same 
    Most of our reservations and Baggage Call Center people are 
women. If for some reason United decided to keep the 
reservation center but to downsize it considerably, a lot of 
these women might have the opportunity to transfer to another 
city, but probably would not take those jobs because of their 
husbands' careers, because of their many family network that 
help them with their children.
    Single mothers, for example, probably would find it hard to 
move, because I know, being a single mother, I have had help 
from my family all of the years I've raised my children.
    So you have to look at those type of jobs. When they say no 
furloughs, that generally means we have offered you a job 
somewhere, and it's up to you if you want it or you turn it 
    That's mainly what I want to put an emphasis on. We've 
heard the promises that reservation won't leave Pittsburgh, but 
we don't know will it remain as large.
    We have 900 people in the reservation center and another 70 
in the Baggage Call Center. We don't know where those jobs--are 
900 jobs going to stay in Pittsburgh? Are the administrative 
people that support us going to remain in Pittsburgh?
    So that's mainly our concern. We need guarantees for all of 
the jobs here. The effort of the Allegheny County leadership to 
secure the proposed maintenance facility for the airport is 
important to the security of certain jobs in this area.
    We support those efforts. However, we don't want to be the 
trade-off for those jobs. We hear the promises that, you know, 
the hub will remain a hub. United Airlines insists that they 
want to grow the hub, as well as Shelley's promise about 
reservations, but we're suspicious of such verbal promises.
    We've seen reservations close because of mergers. I've seen 
four of them close. We've seen hubs come and go. Cleveland and 
Dayton are examples. Baltimore is also an example.
    Baltimore and Washington, it was a hub, then it wasn't a 
hub. Now it's a hub for Metro Jet.
    So, you know, it's nice to say that none of these things 
will ever happen, and I know there is no guarantees for life, 
but I think we need to see something a little more specific in 
their planning, like what they plan to do with certain 
    These types of promises we want for our workers in 
Pittsburgh, but we want something more solid than just saying 
it. There is an anticompetitive impact on the United and US 
Airways merger on Pittsburgh.
    Granted, Pittsburgh has mostly US Airways and has little 
competition, but we control about 75 percent of this market, is 
what I've been told.
    By way of comparison, Philadelphia would control about 55 
percent. United is the second largest competitor----
    Senator Specter. Ms. Fox, your entire statement will be 
made a part of record. So to the extent you can summarize, we 
would appreciate it.
    Ms. Fox. OK. all right. Well, I won't go through then--
there are some charts here, but you can look at those later.
    All I want to say is that in Pittsburgh we have seen the 
various mergers and the impacts. Earlier someone did state 
about certain mergers like Koppers and Mellon and different 
things. And there is good and bad mergers. We're not debating 
    But I've seen the effects in communities likes Aliquippa, 
Braddock, and Homestead, and many others when they were bought 
up by larger companies. They're still struggling to recover.
    Many families left their homes, relocated, took their 
lifetimes to rebuild their entire careers. Many stayed in the 
region. Many homes broke up.
    You know, what happens to communities like Moon Township 
when something does eventually happen to this hub? We don't 
take a position on this merger, but we do want some answers, 
and we would like them in writing. And we thank you.
    Senator Specter. Thank you very much, Ms. Fox.
    [The prepared statement of Ms. Fox follows:]

                 Prepared Statement of Christine A. Fox

    Good Afternoon Senator Specter, Senator Santorum and fellow 
Pennsylvanians. Thank you for the opportunity to address the committee 
today on our important issues regarding the United/US Airways merger. 
My name is Chris Fox. I am the President of the Communications Workers 
of America, Local 13302 that represents nearly 1,700 members in the 
Pittsburgh region. Nationally, we represent about 10,400 customer 
service and reservations employees at US Airways. Our membership 
consists of what we term the ``inside'' or public contact workers at 
the airport operation. These include: ticket counter, baggage service, 
and gate agents; special assistance representatives and US Airways 
clubs; five city ticket office locations; the baggage service call 
center and reservations. We also represent the US Airways Passenger 
Service workers in the Erie Airport. Our Sister local 13301 in 
Philadelphia represents another 700 passenger service workers in 
Philadelphia, Harrisburg, Allentown, and Wilkes-Barre.
    Although we do not represent the many clerical and administrative 
employees at US Airways in the Pittsburgh area, we are also concerned 
about their futures and job security.
    Many of the jobs that United and US Airways share in common are 
crucial to the day-to-day operation of the airline. These workers along 
with our represented passenger service workers are often long-term 
employees who have built their careers from entry-level positions to 
the quality, good paying jobs they hold today. Many of these jobs 
involve industry specific skills; new jobs with comparable benefits and 
salaries would not be available in the area if there were closures or 
staff reductions. Many would be forced to relocate or survive on a 
lesser standard of living. Most of our reservations and baggage call 
center employees are women. If those departments were closed or 
downsized, it is doubtful that most would attempt to relocate because 
of their spouses' career obligations. Single mothers would have to 
consider separating from their network of support of family and 
friends. Beyond the personal impact on the affected workers, the 
political, economic, and social ripple effect of lost jobs on this 
scale would be significant to the region and its development.
    We need guarantees for all jobs here in Pittsburgh and not only for 
two years. The efforts of the Allegheny County Leadership to secure the 
proposed maintenance facility for the airport is important to the 
security of certain jobs in the area. We support these efforts. 
However, this proposed facility must not be a trade-off for the workers 
in the Pittsburgh region.
    We hear the promises that the Pittsburgh Airport will remain a hub; 
in fact, United Airlines insists that they want to grow the hub. In 
addition, Shelly Longmuir, Senior Vice President of International, 
Regulatory and Governmental Affairs at United has stated that there was 
``no plan to transfer the reservations work in Pittsburgh to another 
location.'' This promise is like a ``shell game.'' While the 
reservations office may stay in Pittsburgh, what happens to the 
specialty desk functions or vice versa? But we are suspicious of such 
verbal promises. We have seen reservations centers close as well as 
hubs come and go in this industry. Remember Cleveland and Dayton? In 
Dayton, US Airways management told our workers to ``go ahead, buy your 
new homes, US Airways is here to stay in Dayton as a HUB.'' Within 
weeks, the employees got the news, first from the newspapers, that the 
Dayton Hub was being eliminated. Baltimore/Washington (BWI) is another 
example of a former Hub location. Only when US Airways created Metrojet 
did BWI return to Hub status for Metrojet. Are these the type of 
promises we want for our workers in Pittsburgh? While we are not 
standing opposed to this merger, we want written guarantees of 
acceptable job security.
    There is an anti-competitive impact of the United and US Airways 
merger on Pittsburgh.
    The air-traveling public in the Pittsburgh region have very little 
choice when they fly. US Airways controls 75% of the market at 
Pittsburgh. By ways of comparison, US Airways controls 55% of traffic 
at its Philadelphia hub.
    United is the second largest competitor to US Airways at Pittsburgh 
with 4% market share. Delta is US Airways closest competitor with 
nearly 6% market share. The destinations for which consumers have some 
choice of airlines are the hub cities of the competing airlines. The 
merger between US Airways and United will significantly reduce 
competition in the routes between four of United hub cities.

                                                                   US Airways %      United %       Combined %
                           Destination                             market share    market share    market share
San Francisco...................................................            80.1             8.5            88.6
Denver..........................................................            72.7            13.6            86.3
Los Angeles.....................................................            79.7             5.9            85.6
Chicago.........................................................            44.3            27.2            71.5

    Increased concentration in market power resulting from this merger 
may allow the new United to raise fares and/or reduce the level of 
service by consolidating flights and reducing the number of departures 
to these markets.
    Finally, mergers and buyouts are no stranger to the Pittsburgh 
area. There are many stories about our communities and their people 
that have suffered through plant closures and downsizing. What happened 
to the economies in Aliquippa, Braddock, Homestead, and many others? 
They are still struggling to recover. Many families left their homes, 
relocated in other states, and took years to rebuild their lives. Many 
stayed in the region, but were forced to work several minimum wage jobs 
in order to survive bankruptcy. The financial stress from these 
hardships and the disruption to what was a prosperous life caused the 
breakup of many homes and devastation in the lives of innocent 
children. What happens to communities like Moon Township where most of 
their businesses are supported in majority by US Airways employees?
    As I stated before, we have not taken a position on this merger. 
However we are not strangers to adversity. We are hardworking, 
dedicated, long-term employees who have suffered: wage freezes, pension 
elimination, health care reductions, and three union elections in the 
past nine years. After two years of contract bargaining, we have a 
ratified contract gaining back some of those losses. We ask for your 
consideration and protection. Thank You.
    Research Attachments for anti-trust considerations:
                           Appendix of Tables
                      airport: pit--pittsburgh, pa
                    For Year: 99; Mileage Range: All

                                            Local Connect
              Rank/Airline                   Pax--OUT+IN       % Share
1. US...................................          4,837,890        75.20
2. DL...................................            366,860         5.70
3. UA...................................            242,740         3.77
4. TW...................................            170,820         2.66
5. AA...................................            141,570         2.20
6. NW...................................            130,860         2.03
7. NJ...................................            113,070         1.76
8. RU...................................             96,810         1.50
9. CO...................................             93,990         1.46
10. XJ..................................             93,630         1.46
11. MQ..................................             84,420         1.31
12. 9N..................................             49,140         0.76
13. W9..................................             10,080         0.16
14. YY..................................              1,800         0.03
15. HP..................................                 90         0.00
      Total.............................          6,433,770       100.00
DOT 0&D Table 10/Aviation Data Banks Report #401.

              market: pit--pittsburgh, pa/den--denver, co
              For Year: 99; Distance: 1,302 nonstop miles

                                           Local & Connect
              Rank/Airline               Pax--OUT÷IN    % Share
1. US USAIR............................              93,690        72.70
2. UA United...........................              17,570        13.63
3. NJ Vanguard.........................               5,610         4.35
4. TW Trans World......................               4,270         3.31
5. DL Delta............................               3,430         2.66
6. NW Northwest........................               2,390         1.85
7. AA American.........................               1,210         0.94
8. CO Continental......................                 710         0.55
      Total............................             128,880       100.00
DOT O&D Table 10/Aviation Data Banks Report #403.

           market: pit--pittsburgh, pa/sfo--san francisco, ca
              For Year: 99; Distance: 2,253 nonstop miles

                                           Local & Connect
              Rank/Airline                   Pax--OUT+IN       % Share
1. US USAIR.............................            142,470        80.62
2. US United............................             15,030         8.50
3. TW Trans World.......................              6,120         3.46
4. DL Delta.............................              5,220         2.95
5. AA American..........................              4,190         2.37
6. NW Northwest.........................              1,910         1.08
7. CO Continental.......................              1,750         0.99
8. YY Unknown...........................                 30         0.02
      Total.............................            176,720       100.00
DOT O&D Table 10/Aviation Data Banks Report #403.

       market: pit--pittsburgh, pa/chi--chicago (ord-mdw+cgx), il
               For Year: 99; Distance: 404 nonstop miles

                                           Local & Connect
              Rank/Airline                   Pax--OUT +IN      1% Share
1.US USAIR..............................            172,710        44.28
2. UA United............................            106,110        27.20
3. NJ Vanguard..........................             77,210        19.79
4. MQ Simmons...........................             30,380         7.79
5. AA American..........................              1,310         0.34
6. DL Delta.............................              1,090         0.28
7. TW Trans World.......................                870         0.22
8. NW Northwest.........................                230         0.06
9. CO Continental.......................                100         0.03
10. YY Unknown..........................                 40         0.01
11. RU Continental Exp..................                 30         0.01
      Total.............................            390,080       100.00
DOT O&D Table 10/Aviation Data Banks Report #403.

            market: pit--pittsburgh, pa/lax--los angeles, ca
              For Year: 99; Distance: 2,125 nonstop miles

                                           Local & Connect
              Rank/Airline                   Pax--OUT+IN       % Share
1. US USAIR.............................            146,710        79.67
2. UA United............................             10,910         5.92
3. TW Trans World.......................              9,520         5.17
4. DL Delta.............................              6,890         3.74
5. AA American..........................              4,910         2.67
6. CO Continental.......................              2,750         1.49
7. NW Northwest.........................              2,400         1.30
8. YY Unknown...........................                 60         0.03
      Total.............................            184,150       100.00
DOT O&D Table 10/Aviation Data Banks Report #403.

    Senator Specter. We turn now to our final witness, Mr. 
David Guerriero, vice president of the Master Executive Council 
at US Airways for the Association of Flight Attendants, AFL-
CIO, representing over 10,000 members at US Airways.
    He began working as a flight attendant 14 years ago, was 
elected to vice president for a 3-year term representing nine 
US Airways. Bachelor of science degree in computer science from 
the University of Pittsburgh.
    Thank you for joining us, and we look forward to your 


    Mr. Guerriero. Good afternoon, Senators. Thank you very 
much for giving me the opportunity to speak to you today on 
behalf of AFA and the 10,000 flight attendants that I represent 
for US Airways.
    I am here to testify on behalf of the association and 
specifically Lynn Lenosky. President Lenosky sends her 
apologies and was unable to attend due to a sudden death of a 
family member over the weekend.
    In our initial public statement we said that we needed more 
details about the proposed transaction before we would pass 
judgment on it. That continues to hold true today.
    In late June, United management met with our union 
counterparts. In that meeting few details were provided beyond 
what was already public knowledge. US Airways management hasn't 
been forthcoming with details, either. So questions abound.
    There are two primary issues facing flight attendants 
concerning the proposed merger. And they are negotiations for a 
single contract that would cover both US Airways and United 
flight attendants, and also United's plans for the treatment of 
the wholly-owned subsidiaries.
    Those are the US Airways express carriers at PSA, Piedmont, 
and Allegheny, which are part and parcel of the purchase of US 
Airways Group.
    AFA believes that in order to merge the operations of the 
airline, negotiations must result in a ratified contract that 
covers all flight attendants at the new United.
    We are committed at working toward a contract that provides 
the flight attendants with the best working conditions, best 
rates of pay, and best benefits in the industry, one that 
reflects the size and strength of the new United.
    We will not approve of this transaction unless negotiations 
with United to merge the work groups results in such a 
contract. The AFA has been learning from the negotiating 
practices of Mr. Wolf and his negotiated contract.
    AFA's leadership is also committed to insuring the futures 
of flight attendants at US Airways' wholly-owned subsidiaries, 
they're treated fairly in the merger process.
    We will not stand idly by while United violates any of our 
flight attendant contracts, if, in fact, that is their intent.
    Merging our seniority list is provided for in the AFA 
constitution and bylaws, and we're committed to that process. A 
US Airways flight attendant job is protected by a no furlough 
clause that lasts throughout the year 2005.
    Our seniority is also protected by the Allegheny Mohawk 
Labor Protective Provisions negotiated as a part of our 
contract. Additionally, our contract is protected with a 
successor clause that is binding on the company.
    However, we will remain neutral in our assessment of the 
corporate transaction until our questions are answered and our 
issues are addressed.
    The subcommittee should know that the US Airways and the 
United flight attendants met in Washington, DC, 2 weeks ago to 
discuss the proposed merger. At the conclusion of the meeting, 
the leaders resolved to remain fully committed to the principle 
that the merger of these airlines must result in working 
conditions, rates of pay, and work rules for all members that 
are the best in the industry and farsighted in scope.
    During our meeting 2 weeks ago, the leadership reaffirmed 
our commitment to insure a smooth transaction and effective 
implementation of the AFA merger policy and related provisions 
of the AFA constitution and bylaws.
    The AFA merger policy stipulates that when two airlines 
merge, the flight attendants' seniority lists are merged in the 
most fair and equitable manner for all using date of hire. But 
again we stopped short of endorsing the proposed transaction 
and instead passed a resolution that concluded.
    Therefore, be it finally resolved that we will withhold our 
support for the proposed transaction until we have successfully 
concluded that the negotiations necessary tofacilitate the 
combination of United Airlines and US Airways Group have resulted in 
the best flight attendant contracts in the industry and an acceptable 
resolution is reached to protect the future of all flight attendants.
    I want to stress that the leadership of all carriers 
involved will work together for the mutual benefit and 
protection of all AFA members.
    I'd like to thank you for the opportunity to speak with you 
today again, and I will be happy to answer any questions that 
you have.
    Senator Specter. Thank you very much, Mr. Guerriero, for 
your testimony and for your approach. You want to see exactly 
what's going to happen to your membership before you take a 
    And I think that's what Mr. Schifano said, and Ms. Fox laid 
it right on the line. She said that she was suspicious.
    What's the difference, Ms. Fox, between suspicious and 
skeptical? You don't have to answer that question. But when you 
said you want to have it more specifically and you'd like to 
have it in writing, that pretty well sums it up, in order to 
make a judgment.
    And Senator Santorum and the subcommittee and the full 
committee and the Senate and the U.S. Government want to make 
sure that everyone is treated fairly, that there is not an 
oligopoly which unfairly raises prices through market share and 
that the employees are treated fairly. And when you talk about 
no furloughs, it doesn't mean an, in effect, dismissal because 
you're being asked to move somewhere which is unrealistic.
    So we intend to keep looking, keep plugging, and we like 
what we hear, that you're going to keep looking, too. Because 
that's the way to find out exactly what it is so we know what 
position to take or where to get the safeguards that will give 
appropriate assurances.
    Senator Santorum. Thank you, Mr. Chairman, and I just have 
a comment, also, and that is I think I've made it fairly clear 
from my comments prior to this hearing and my comments at this 
hearing that while I have concerns generally about the 
traveling public and the fares in service, I frankly don't see 
any down side from that perspective of this merger.
    What I do see as a potential down side with respect to some 
of the employees that you represent here in Pittsburgh, and 
that is my focus, and that will remain my focus until that 
focus is brought into clarity and I get an answer that is 
acceptable to the people at this table. So let's continue to 
stay in touch.
    Senator Specter. Thank you all for coming today. We will 
have another hearing two weeks from today in the Lehigh Valley, 
and we will keep looking and keep examining that this proposed 
merger makes sense for Pennsylvania and the United States. 
Thank you.
    [Whereupon, at 2:19 p.m., the subcommittee adjourned.]