[Senate Hearing 119-272]
[From the U.S. Government Publishing Office]
S. Hrg. 119-272
EXAMINING COMPETITION IN
AMERICA'S SKIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ANTITRUST,
COMPETITION POLICY, AND
CONSUMER RIGHTS
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 30, 2025
__________
Serial No. J-119-42
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
www.judiciary.senate.gov
www.govinfo.gov
_______
U.S. GOVERNMENT PUBLISHING OFFICE
62-655 WASHINGTON : 2026
COMMITTEE ON THE JUDICIARY
CHARLES E. GRASSLEY, Iowa, Chairman
LINDSEY O. GRAHAM, South Carolina RICHARD J. DURBIN, Illinois,
JOHN CORNYN, Texas Ranking Member
MICHAEL S. LEE, Utah SHELDON WHITEHOUSE, Rhode Island
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
JOSH HAWLEY, Missouri CHRISTOPHER A. COONS, Delaware
THOM TILLIS, North Carolina RICHARD BLUMENTHAL, Connecticut
JOHN KENNEDY, Louisiana MAZIE K. HIRONO, Hawaii
MARSHA BLACKBURN, Tennessee CORY A. BOOKER, New Jersey
ERIC SCHMITT, Missouri ALEX PADILLA, California
KATIE BOYD BRITT, Alabama PETER WELCH, Vermont
ASHLEY MOODY, Florida ADAM B. SCHIFF, California
Kolan Davis, Chief Counsel and Staff Director
Joe Zogby, Democratic Chief Counsel and Staff Director
Subcommittee on Antitrust, Competition Policy,
and Consumer Rights
MICHAEL S. LEE, Utah, Chair
JOSH HAWLEY, Missouri CORY A. BOOKER, New Jersey,
THOM TILLIS, North Carolina Ranking Member
ERIC SCHMITT, Missouri AMY KLOBUCHAR, Minnesota
KATIE BOYD BRITT, Alabama RICHARD BLUMENTHAL, Connecticut
ASHLEY MOODY, Florida PETER WELCH, Vermont
ADAM B. SCHIFF, California
Thomas DeMatteo, Republican Chief Counsel
Lynda Garica, Democratic Chief Counsel
C O N T E N T S
----------
OPENING STATEMENTS
Page
Lee, Hon. Michael S.............................................. 1
Booker, Hon. Cory A.............................................. 3
WITNESSES
Anderson, Gregory................................................ 6
Prepared statement........................................... 45
Responses to written questions............................... 104
Biffle, Barry.................................................... 7
Prepared statement........................................... 52
Responses to written questions............................... 109
McGee, William J................................................. 9
Prepared statement........................................... 57
Responses to written questions............................... 113
Pinkerton, Sharon................................................ 11
Prepared statement........................................... 67
Responses to written questions............................... 122
Sitaraman, Ganesh................................................ 13
Prepared statement........................................... 91
Responses to written questions............................... 153
EXAMINING COMPETITION
IN AMERICA'S SKIES
----------
TUESDAY, SEPTEMBER 30, 2025
United States Senate,
Subcommittee on Antitrust, Competition Policy,
and Consumer Rights,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:33 p.m., in
Room 226, Dirksen Senate Office Building, Hon. Michael S. Lee,
Chair of the Subcommittee, presiding.
Present: Senators Lee [presiding], Hawley, Britt, Moody,
Booker, Klobuchar, and Blumenthal.
Also present: Senator Durbin.
OPENING STATEMENT OF HON. MICHAEL S. LEE,
A U.S. SENATOR FROM THE STATE OF UTAH
Chair Lee. I will call the hearing to order. Thanks to all
of you for being here. We look forward to today's conversation.
Every day in America, millions of passengers rely on
airlines to get them safely, easily, and efficiently to life's
most important moments--weddings, funerals, the birth of
children and grandchildren, professional opportunities, job
interviews, meeting with clients old or new, and even in some
cases daily commutes. Air travel has become and genuinely is
essential to our lives.
Since deregulation of the airline industry began in 1978
and increasingly in the years that followed from that,
competition has driven affordability, innovation, and improved
service in countless respects within the industry. For decades,
rivalry among carriers allowed for consumer choice, and it kept
fares within reach. Yet in recent years, there has been
significant consolidation in the industry. This has reshaped in
some ways the U.S. airline market, reducing the number of total
competitors. Today, there are just four major carriers--
American, Delta, United, and Southwest--that control over 80
percent of U.S. domestic air travel. And that is a change from
not too many decades ago when there were more players than
that, far less market concentration.
Legacy carriers have invested in creating a hub-and-spoke
model. The model routes passengers through central airports
more efficiently, and that has the effect of lowering
maintenance costs, increasing connectivity, and otherwise
increasing the beneficial network effects available to a larger
airline.
The hub system has also created some dominant positions,
particularly at a few key airports. In Atlanta, Dallas/Fort
Worth, Charlotte, and Newark, for example a single airline
controls between 70 and 80 percent of passenger traffic. In
Salt Lake City, St. Louis, and Minneapolis, one carrier
accounts for roughly 60 percent of passenger traffic. Even at
airports with far less concentrated market shares, carriers
often don't compete on the same routes, leaving travelers
effectively with only one direct option for a specific
destination. Some of this, of course, is going to happen in any
system that involves as many cities, as many places where
people might want to travel as others. Nonetheless, we see the
trend as what it is, a trend that is perhaps resulting in less
competition within the industry than we have seen at times in
the past.
This concentration is, at least in part, the result of a
wave of mergers--Delta-Northwest, then United-Continental, and
Southwest-AirTran. The Obama administration initially
challenged the American-U.S. Airways merger, but it reached a
settlement, one that seemingly failed to address the broader
nationwide concerns alleged in the complaint in that case.
Most recently, the Biden administration blocked the
proposed JetBlue-Spirit merger, ostensibly to preserve Spirit
as an ultra-low-cost competitor. In that case, the Department
of Justice took an acrobatic distortion and contortion of the
market and overlooked a lot of the real-world dynamics. The
merger likely would have enhanced competition by creating a
more financially stable airline with a larger network, one that
could provide additional competition to the legacy carriers.
This would have enabled more competition with these legacy
carriers nationwide. And one thing we know about competition,
it tends to bring down prices, and it tends to result in
improvements to quality as different competitors try to compete
for the money of the passengers they want to carry.
Yet after that merger was blocked, Spirit ended up filing
for bankruptcy, as many predicted. This development raises key
questions about enforcement and our antitrust framework such as
how a market ought to be defined and whether the failing-firm
defense captures real-world dynamics and incentives and how
this ought to frame how we think about antitrust law and the
manner in which it is enforced moving forward.
Low-cost carriers and ultra-low-cost carriers have been an
important competitive constraint on pricing, of course. There
is a lot that they add to the picture. When one of these
airlines enters a market, average fares typically drop, at
least for the affected routes, but those competitive forces are
facing financial headwinds. Spirit is in bankruptcy. Southwest
is abandoning, in some ways, the very business model that made
Southwest the disruptor that it has been, eliminating free
checked bags and charging for seat assignments, moving closer
to the legacy carrier model. JetBlue's partnership with
American and the proposed merger with Spirit were blocked.
JetBlue is now seeking a collaboration with United in order to
survive.
Broader economic conditions also present challenges.
Aircraft supply shortages, engine repair delays, and rising
labor costs all contribute in weighing on the overall
competitive dynamic in the industry. Additionally, with fewer
competitors than we've had in the past, the remaining airlines
can coordinate on capacity more easily. This limits seat growth
across the industry. Limited slots and limited gates also tend
to reinforce those same constraints, so do shortages of air
traffic controllers and an antiquated air traffic control
system.
The U.S. Department of Transportation is modernizing our
air traffic control system. They are streamlining FAA hiring
and raising the pay that they offer to controllers. And I want
to commend Secretary Duffy at the Department of Transportation
for his leadership in addressing these challenges and working
toward solutions to each of them. The reforms are essential,
not just for safety and reliability, but also for creating the
capacity that we need in order to allow for an increase in
competition.
Today's hearing is one that I hope will be an important
first step in examining competition issues as we face them in
the airline industry. Americans deserve the benefits of
competition, especially when they fly, in the form of lower
fares, better service, and more choices.
Chairman Lee. And in advance, I want to thank each of our
witnesses for coming today. I look forward to their insights.
Now we are going to turn to my friend and colleague, the
Ranking Democrat on the Committee, Senator Cory Booker.
OPENING STATEMENT OF HON. CORY A. BOOKER,
A U.S. SENATOR FROM THE STATE OF NEW JERSEY
Senator Booker. I am really grateful to the Chairman of
this Committee for calling this. This is an actual area--in
fact this whole Subcommittee is an area--there is a lot of
bipartisan alignment and a lot of really growing concern as
Americans are seeing prices on everything go up. This is not
the relegation of any political party. These are trends in many
ways that have been going on for too long.
About the airline industry, I have to say, I am a very
impacted witness, as well as the Ranking Member, because at
6'3'' and larger than most Americans, I find our airline seats
really inadequate, feeling that pain that many Americans are
feeling, in addition to a lot of the other challenges with air
travel.
There are just things folks don't understand. They really
can't, and it is understandable the confusion and the
frustrations that American consumers are feeling when it comes
to airlines. Most Americans don't understand why Google Flights
will say that it is cheaper to fly for 10 hours with a stop
instead of a 6-hour nonstop, or why it is cheaper to have a
layover in Atlanta when you are flying from Philadelphia to
Kansas City when no reasonable person can consider Atlanta on
the way.
Nowadays airlines advertise so many different fares and
classes, whether it is premium, economy, board first, priority,
economic, basic, and they tack on so many fees for everything
from taking a bag on board to sitting with your other family
members. It is unbelievable. Those fees get labeled as either
ancillary or junk fees, and we really believe, at least I
believe, that this is a regulatory question and more.
And here is the thing. American passengers spend what seems
like a third of their monthly mortgage to fly nowadays. Major
airlines that have repeatedly benefited from Federal Government
bailouts now pay less in taxes and pocket more from consumers
because of these separate fees customers pay on add-ons that
are not taxed like base airfare. Back when consumers paid in
all in airfare, that tax revenue actually went toward improving
airports and improving airport infrastructure. But the system
as it was before is not what it is now. And these problems are
hurting airline competition and really hurting consumers.
And there are more issues than just fees. But let's just
say that when the former Secretary Buttigieg initiated
rulemaking that would have required airlines to be more
transparent about these extra fees, unfortunately, that has
been rolled back now under the current administration, which is
going to make a bad situation far worse.
But fees aren't the only thing. Price discrimination or
price hikes due to the inflammation of AI-based surveillance
pricing unfairly targets consumers and takes advantage of their
circumstances, like flying solo or having must-go trips where a
loved one is ill, or worse, where there is a funeral to attend.
If AI-based surveillance pricing, for example, sees a consumer
search for funeral home and palliative care while another
search is last-minute couples getaway, the airline could show
the grieving traveler higher prices based on their estimated
willingness to pay.
And that is where we go to low-cost airlines. And it is
important that we realize that low-cost airlines have a role to
play in the industry because when low-cost carriers enter the
market, we see fundamentally that competition flourishes and
prices go down. I remember a moment of honesty with JetBlue
when they warned that all that power in the hands of a very few
deep-pocketed airlines has implications for consumers in the
form of reduced options, high fares, and often poor service.
Now, that is really something that is getting worse.
Anticompetitive practices seemingly have left Americans with
less and less access to air travel. After both 9/11 and COVID-
19 pandemics, Congress bailed out the airlines to avoid a
collapse of our entire airline industry. Yet, since the
pandemic, big airlines have dropped dozens of cities from
services, places like Flint, Michigan, and Lincoln, Nebraska.
Some cities like Dubuque, Iowa, and Toledo, Ohio, have lost all
major carrier service. The capital city of Wyoming, Cheyenne,
has lost service on and off over the last decade and has had to
guarantee the revenue of a major airline merely to secure
regularly scheduled service to a single hub all through
taxpayer dollars. That is just not right.
We are going to hear from incredible experts today about
rural and mid-sized cities routes and connectivity and how
airport hubs don't work, but it is clear to me that taxpayers
and Government have been invested in the success of airlines
and airports in America, and we deserve better returns on that
investment in the form of efficient, safe, meaningful air
choices and competitive pricings.
The stakes are really high. Competition is critical for
safety and for maintaining and supporting the essential
workforce that ensures safety and maintenance. I believe that
we have to do more. We must invest in our systems, including
addressing our air traffic controller shortage and our
infrastructure needs. And it seems like this industry needs
capacity, more routes to smaller mid-sized cities and a bit of
a buffer. This is something we should all be committed to. More
staff, bigger seats, and extra aircrafts on standby should be
part of this conversation.
To weather crisis and the natural boom-and-bust cycles in
the market, as well as to prevent bankruptcies and unfair
competition that lead to ultimately less meaningful choices for
hot and higher airfares for American travelers, is truly at
issue. A resilient airline industry is the most important goal
here. To keep American carriers competitive around the world
and to protect travelers from safety issues that D.C. locals
have been tragically reminded this year could have serious
consequences. We have work to do, and competition is at the
center of it. And this Committee, I am grateful for. It is
hopefully going to start finding some solutions.
The last thing I want to say is I want to add to these
witnesses, it is a big deal when you come and testify before
Congress, before the U.S. Senate. It is also a bit of a
sacrifice leaving your jobs and your families often to come
here. Many of you had to fly, and we know how burdensome that
can be, so I want to thank everybody for being here.
Senator Booker. And I will try not to get very upset at
Professor Sitaraman because he is an extraordinary guy--I have
read his bio--but that hair is very obnoxious to me----
[Laughter.]
Senator Booker [continuing]. And the Chairman of this
Committee, sir. I should hold him in contempt of Congress but--
--
Chair Lee. It almost feels like a war crime.
[Laughter.]
Senator Booker. Yes, sir. There was a day that we looked
that good.
Chair Lee. It is a great point. We really do appreciate you
coming here and knowing how busy you all are.
It is important to remember that while much of what we have
said and what we may explore may sound like a complaint. There
is not any one person or one business that has developed the
status quo. This has been an iterative process made over
multiple decades under multiple administrations and different
antitrust regulators over many years. I think the question
before us is what the State of competition is in the industry
and what, if anything, do we need to know as a Subcommittee
charged with periodically reviewing our antitrust and
competition policy laws and also the enforcement of those
through our oversight capacity, whether things are going in the
right direction.
So with that, I will introduce our witnesses. We have got
Gregory Anderson here as the president and CEO of Allegiant
Airlines; Sharon Pinkerton, who is the senior vice president of
legislative and regulatory policy at Airlines for America;
Barry Biffle, who is the president and CEO of Frontier
Airlines. We have Professor Ganesh Sitaraman here. He is a
professor at Vanderbilt University School of Law. And last but
not least, William McGee who is here as a senior fellow for
aviation and travel at American Economic Liberties Project.
Thanks to all of you for being here.
If you will each stand, I will swear you in, and then we
will begin.
[Witnesses are sworn in.]
Chair Lee. Thank you. The record will reflect that they
each answered in the affirmative.
All right. Let's begin with you, Mr. Anderson, and then we
will move from your end of the table one by one down. So we
will hear from Mr. Biffle, Mr. McGee, Ms. Pinkerton, and then
we will finish with Mr. Sitaraman before opening it up for
questions.
Go ahead, Mr. Anderson.
STATEMENT OF GREGORY ANDERSON, CHIEF EXECUTIVE OFFICER,
ALLEGIANT, LAS VEGAS, NEVADA
Mr. Anderson. Chairman Lee, Ranking Member Booker, and
Members of the Subcommittee, thank you for the opportunity to
appear before you today. My name is Greg Anderson, and I serve
as the CEO of Allegiant Travel Company.
At Allegiant we offer safe, reliable, convenient travel at
unbeatable value. All of our flights are nonstop and focused on
the leisure traveler. Without Allegiant, many people who live
outside major cities wouldn't have access to affordable air
travel. By offering unbundled pricing and low fares, we make it
possible for a broader spectrum of Americans to travel to high-
priority vacation destinations. Roughly 70 percent of the
routes we serve have no other nonstop flight options. The
convenience and value we provide adds competition to the
market, expanding the range of options available to these small
and medium-sized communities.
I am here to talk about potential ways to make air travel
more accessible for everyone and to share my concern that, if
trends continue, American travelers may have fewer options and
face higher prices. We believe that there are a few key actions
that can help strengthen the sector.
First, the advancement and modernization of air traffic
control systems across all communities, big and small.
Inefficiencies and delays within the air travel industry are
often attributable to outdated technology and insufficient
staffing. We are encouraged by the administration's plan to
modernize ATC and Congress' support and funding.
Second, improving gate access for value airlines. The
current gate allocation process tends to reinforce the existing
advantages of legacy carriers. To address these discrepancies,
we supported the bipartisan Airport Gate Competition Act
introduced last Congress and would welcome such legislation.
Third, international market access through joint ventures.
Large legacy carriers have been allowed to enter into broad
alliances for decades. These ventures give them marketing
power, scheduling power, and pricing power that small carriers
cannot match. Allegiant sought to pursue a similar joint
venture but tailored that to the value airline model. In 2021,
in partnership with Viva Aerobus in Mexico, we filed for a
first-of-its-kind value airline alliance. Together, we proposed
92 nonstop routes between the U.S. and Mexico. This alliance
would introduce low-fare competition into the market. It could
increase the total number of direct U.S.-to-Mexico routes by 50
percent and give nearly 5 million more Americans access to
affordable international travel. However, this venture has yet
to receive approval from the Department of Transportation
despite these clear procompetitive benefits.
Last, I would like to discuss regulation of the industry.
Let me be clear. Safety is and always must be the top priority.
But rules that go beyond safety and into regulation of consumer
choice will inevitably lead to pricing out the most the most
fair-cost-conscious customers, customers that we are proud to
serve. Full fare advertising rules intended to increase
transparency actually conceal the impact the Government fees
and taxes have on the consumer. Allegiant offers clear pricing,
letting customers see and select only the options they want,
prioritizing transparency and choice.
We also go beyond what regulation requires when it comes to
standing behind our product. For example, Allegiant compensates
passengers up to $300 in addition to a ticket refund if we
cancel a flight within our control.
Air travel innovation is driven by competition. When value
airlines like Allegiant enter new markets, the average fare
dropped by 19 percent across all airlines. We believe that a
healthy airline industry benefits everyone. Value airlines such
as Allegiant make it possible for a family of four to take
their dream vacation for hundreds of dollars less than they
would otherwise pay.
Allegiant is proof that competition and deregulation works.
I am proud of the 70 percent of customers who choose to fly
with us again. We provide otherwise ignored communities with
safe, reliable, and nonstop service at prices that are
affordable for everyday Americans. In my visits to our bases
and through conversations with customers, I can tell you that
what we provide is necessary and important to the industry.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Anderson appears as a
submission for the record.]
Senator Booker. Mr. Chairman, can I just put into the
record that Barry Biffle is an awesome name? Yes, yes.
[Laughter.]
Chair Lee. Does anyone object?
Senator Booker. No? Okay.
[Laughter.]
Chair Lee. Without objection, it will be duly noted in the
record.
Senator Booker. Thank you very much.
Chair Lee. Go ahead, Mr. Biffle.
STATEMENT OF BARRY BIFFLE, CHIEF EXECUTIVE OFFICER, FRONTIER
AIRLINES, DENVER, COLORADO
Mr. Biffle. Thank you. I don't have the hair he does, and
it's too late in life, I guess, for that, but thank you.
So Chairman, Ranking Member, and Members of the
Subcommittee, I thank you for the opportunity to appear before
you today. Airline CEOs like myself usually get invited to
Capitol Hill when something's gone wrong, a snowstorm, a
canceled flight, or an angry customer on the evening news, so
let me start by thanking you for inviting me under better
circumstances.
Again, I'm Barry Biffle. I'm the CEO of Frontier Airlines.
At Frontier we have a simple mission--make flying affordable,
greener, and more accessible for the average traveler. We're a
low-cost carrier, which means we don't rely on fancy lounges or
first-class suites. What we offer is safe, reliable, and
affordable way for Americans to travel.
Today, I want to speak very seriously about a few issues,
and the first one I want to talk about is gate access and how
that impacts competition. Air travel is not just about getting
from point A to point B. It's about opportunity, the ability
for a family in a small town to take their kids to Disney or
for a student to jump on a trip home for the holidays.
Competition makes all that possible.
History shows us that when low-cost carriers like Frontier
enter market, fares go down, sometimes 20, 30, even 40 percent.
Customers win. The legacy airlines, United, Delta, American,
have grown traffic just 6 percent since 2000 while raising
fares over 40 percent. By contrast, low-cost carriers have
grown traffic by 152 percent with only a 10 percent increase in
fares. That's competition at work.
So the question before us is not whether competition works.
It's whether new competitors are allowed to compete at all, and
that's what brings me back to gates. In our industry, the gate
is the front door. You can have the planes, pilots, fuel, and
crews, but if you don't have the gate, you don't get to play.
Right now, too many of those gates are locked up by a handful
of big airlines.
Across the country, we see fortress hubs, airports with a
single airline controlling 60, 70, 80 percent of the gates.
This kind of dominance doesn't give carriers pricing power. It
gives them control of who gets in and out of the market. Here's
the kicker. Many of these gates are not even fully used.
Dominant carriers hold them. They sit on them and block
competitors from coming in. Meanwhile, customers in these
cities pay higher airfares and have fewer choices as a result.
To put in everyday terms, if McDonald's leased every street
corner in a town, set up one restaurant and left the other
corners empty, then told Burger King and Wendy's they weren't
allowed to open shop, that's not a free market. That's
protectionism with fries on the side, supersized, and that's
what we have in the United States airline industry.
The results are predictable and harmful. Fortress hub
cities, fares, and higher competition is limited. Travelers in
Atlanta, Newark, Dallas, and other concentrated airports
routinely pay more than their counterparts in competitive
markets. So when gates are locked up, it isn't just a headache
for the airlines like mine, it's a tax on the traveling public.
Moreover, the single largest disruption to our airline
beyond weather and air traffic control is gate holds caused by
obtaining gate--not getting gate access. Our daily flights per
gate can be double that of most big airlines. However, the
inefficiency of allocation of gates often results in our
diminished on-time reliability and otherwise preventable
cancellations.
The Subcommittee has an opportunity to fix this. I want to
suggest a few practical steps. We need use-it-or-lose-it rules.
Airlines should not be allowed to hold preferential gates
indefinitely without using them. If you don't use the gate
efficiently, you should be required to give it up to another
carrier who can. It should be measured monthly and held to
account.
Common-use requirements, when you build a new gate, at
least a third of those gates should be available for common
use. That means anyone can come in, not just the incumbent, and
provide competition.
And we also need DOT enforcement authority. The DOT should
be empowered to step in when dominant carriers hoard all the
gates and block competition. They already play a role in slot
allocation. They should do the same thing with gates. And
again, it should be done monthly.
And there should be transparency in lease arrangements.
Right now, gate leases can stretch decades, locking out new
entrants. We should require clear reporting and accountability.
These changes wouldn't cost taxpayers a dime, and they don't
require subsidies or bailouts. They just open the door,
literally, for competition.
I know some may say, well, fortress hubs bring benefits,
more flights, destinations, but the evidence is the opposite.
Once one airline dominates, there's nothing there. But look, I
think there's more to this than just gate access. There's
loyalty programs that are subsidizing their basic economy,
which enables them to dump low prices out there. Even you had
the CEO of United Airlines saying recently that he allows
carriers like us to carry traffic. That's an interesting
comment that we get what they allow us to carry, so they should
look into that. And then same thing on re-accom agreements. We
should look into those because those are also harmful.
I want to thank everybody for having us, and we look
forward to discussing things we can do to help with
competition.
[The prepared statement of Mr. Biffle appears as a
submission for the record.]
Chair Lee. Thank you very much.
Mr. McGee.
STATEMENT OF WILLIAM J. McGEE, SENIOR FELLOW FOR AVIATION AND
TRAVEL, AMERICAN ECONOMIC LIBERTIES PROJECT, WASHINGTON, DC
Mr. McGee. Chair Lee, Ranking Member Booker, Ranking Member
Durbin, and Members of the Subcommittee, thank you for hosting
this hearing today. My name is William J. McGee, and I'm the
senior fellow for aviation and travel at the American Economic
Liberties Project, a nonprofit organization dedicated to
addressing the problems of concentrated economic power.
Over the past 40 years, I've worked in airline flight
operations as an FAA licensed aircraft dispatcher and then as
an aviation journalist and author. Since 2000, I've been an
airline passenger advocate.
The industry I entered 40 years ago no longer exists. It
has been destroyed by deregulation and a lack of competition.
When Congress passed the Airline Deregulation Act of 1978, it
did so with the intention of ``placing maximum reliance on
competition,'' ``avoidance of unreasonable concentration,'' and
``encouragement of entry by new air carriers.'' By its own
aims, deregulation has failed. U.S. carriers are more
concentrated than ever due to decades of lax antitrust
enforcement and the failed experiment of deregulation.
Consolidation is rampant. Competition has all but
disappeared. What was once a vibrant industry is now led by an
oligopoly of four airlines--American, Delta, Southwest, and
United--controlling 80 percent of the market. They have immense
pricing power, with a smattering of smaller low-fare airlines
offering only limited alternatives.
Neither size carrier has a long-term sustainable business
model. How do we know? Mergers and bankruptcies have both been
commonplace since 1978. Numerous airlines have had to merge, go
bankrupt, or get American taxpayer-funded bailouts to survive.
Across nine hubs nationwide, the three biggest airlines control
70 percent or more of all flights, including in Newark,
Minneapolis, and Salt Lake City. In Charlotte, American
dominates 88 percent of departures. Since 2007, only two new
entrants have emerged, marking the longest dry spell in
history.
Despite claims from the industry that there's competition
between carriers, the DOT's quarterly airfare reports suggest
the three largest airlines--American, Delta, and United--have
virtually ceased to compete against each other on price. The
few remaining low-fare airlines--Allegiant, Avelo, Breeze,
Frontier, and Spirit--are the only meaningful source of pricing
discipline, keeping fares on average 21 percent lower on the
routes where they compete.
The Big Four thwart competition through myriad means,
including fortress hubs, global alliances, devalued frequent
flyer programs, branded credit cards, predatory pricing, and
more. Consumers and entire communities nationwide are worse off
due to airline consolidation. Passengers are left with higher
fares, fewer nonstop destinations, and fewer flights, and
workers have fewer rights and have lost jobs. Airlines abuse
their customers without consequence, whether it's inflicting
physical violence on passengers after overbooking seats or
charging them to sit next to toddlers. Major hubs were closed
in cities as large as St. Louis and Raleigh-Durham. These
closures hit smaller and rural communities particularly hard.
While committing these harms, airlines do whatever they can
to avoid oversight and regulation. For example, they often
ignore DOT tarmac limitations, which can leave passengers
stranded for hours. Today, the largest airlines want even more
deregulation at the expense of passengers. In May, Airlines for
America, representing the largest carriers, filed a 93-page
comment requesting that DOT weaken or eliminate most passenger
protections, including fee transparency, cash refunds, flight
disruption compensation, and family seating policies for kids
under 13. Two days later, DOT issued a deregulatory agenda that
looked copy-pasted from Airlines for America's wish list.
Given this regulatory peril, it's imperative Congress step
in. This Subcommittee should consider the following proposals,
which would directly address the concerns of passengers,
workers, and local economies.
First, we applaud Senator Hawley for cosponsoring the
Airport Gate Competition Act. This is commonsense legislation.
It would promote competition by ensuring access to critical
airport infrastructure for smaller airlines.
Second, Congress should eliminate Federal preemption, which
has blocked State courts, legislatures, and Attorneys General
from any airline oversight since 1978.
Third, large institutional investors often pursue stakes in
all four of the Big Four carriers, reducing their incentives to
compete. It's time to restrict common ownership in more than
one domestic airline.
Fourth, Congress should require the FAA to prevent the
majors from thwarting low-fare competition at congested
airports. Takeoff and landing slots shouldn't be bought, sold,
or traded by carriers.
In conclusion, the failures of deregulation and
consolidation have made it clear that new and sensible
approaches to regulation are long overdue to protect consumers,
enhance competition, and ensure access for smaller airlines.
Your constituents will tell you the truth. Flying today is a
miserable experience. It wasn't always this way. It doesn't
have to be this way.
We're at an inflection point. Congress needs to investigate
the failures of deregulation and, just as it did 50 years ago,
hear from the public, not just airline executives and their
lobbyists.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. McGee appears as a
submission for the record.]
Chair Lee. Thanks so much.
Ms. Pinkerton.
STATEMENT OF SHARON PINKERTON, SENIOR VICE PRESIDENT OF POLICY
AND REGULATORY AFFAIRS, AIRLINES FOR AMERICA, WASHINGTON, DC
Ms. Pinkerton. Thank you so much for the invitation to
testify today.
Today, more people are flying than ever, and for good
reason. Fierce competition between airlines has brought us
bargain airfares and a vast array of flight options, but it
hasn't always been like this. Before the 1978 Deregulation Act,
fewer than one in four Americans had been on a plane, and
that's because the Government controlled prices, schedules, and
routes. That Government one-size-fits-all approach resulted in
flying being a luxury that only the wealthy could afford. In
contrast today, 90 percent of the American public has flown.
That is competition in action. Freeing the marketplace from
Government command-and-control has literally democratized air
travel in this country.
We can measure the State of competition in our industry
using three metrics--price, diversity of options, and customer
service. First, price. Affordable airfares are ubiquitous. Just
yesterday, I got an email from one of our carriers offering a
$39 fare. All airfares, including ancillaries, are at historic
lows. That's the data. The price of an average domestic ticket
back in 1977 was about $800. Today, it's 450 percent less.
Now, we all know in contrast what's been happening with the
consumer price index. You mentioned it, Senator Booker. The
consumer price index over the last year has been five--up 23
percent in all categories except one, airfare. It's gone down.
In a world where inflation is hitting food, housing, medical
expenses, and other essentials, the low cost of air travel is a
noticeable and positive outlier. And frankly, much of that is
due to the lower-cost carriers.
And that gets me to my second metric, the availability of
diverse options. Over the last few decades, the lower-cost
carriers have indeed been a major engine of growth in our
industry. They have taken market share away from the global
network carriers. And as a result today, the lower-cost
carriers carry almost 50 percent of domestic traffic in this
country.
It's important to know that the data show that the number
of competitors per origin and destination city pair in this
country has increased since deregulation, increased. Now, part
of that is due to the fact that we've had new entrants join the
fray. Breeze, Avelo joined in 2021. And in fact, Breeze just
announced last week that they're going to be providing
international service next year, which is an indication that
just like the way the domestic market has transformed, the
international market has been transformed through the pursuit
of open-skies agreements that open up foreign markets.
The third market--the third metric is customer service. Our
carriers have been investing record-breaking amounts in
innovations in order to elevate the customer service that they
provide. They're investing in tech and physical infrastructure.
They're improving their IT systems, mobile apps, lounges,
loyalty programs, bigger overhead bins, and faster Wi-Fi on
planes, just to name a few things. And it's working. Again,
back to the data, independent survey after survey shows that
customer satisfaction is high. Not perfect, but good. Given the
incredible logistical complexity of carrying 2.7 million people
every day safely on 27,000 flights, we are proud of the fact
that the vast majority of Americans continue to give high marks
to airlines and their airline travel experience.
Given the robust State of competition, we do have a threat
to competition. The biggest threat is our short staffing and
our antiquated air traffic control system. You don't need to
look any further than the tragedy at DCA, the outages in the
northeast of the FAA equipment, and at DFW last week as
evidence of the pitiful condition of our air traffic control
system. That's why we are deeply appreciative that Congress has
approved the $12.5 billion down payment on Secretary Duffy's
air traffic control plan, but frankly it can't come soon
enough. As you know, we are flying 10 percent fewer flights and
have been for 2 years out of the major New York and New Jersey
airports. Now, flying less is bad for big airlines, it's bad
for small airplanes--airlines, but it's the worst for customers
because it robs them of options.
So while the State of competition is strong, demand is also
strong by the way. TSA has had 8 of their 10 busiest days this
year. We do think Congress needs to take action. We urge you to
support a new air traffic control system that would be safer,
will allow for increased flying, and give customers even more
choice. Thank you.
[The prepared statement of Ms. Pinkerton appears as a
submission for the record.]
Chair Lee. Thank you.
Professor Sitaraman.
STATEMENT OF GANESH SITARAMAN, PROFESSOR OF LAW, VANDERBILT LAW
SCHOOL, NASHVILLE, TENNESSEE
Professor Sitaraman. Chairman Lee, Ranking Member Booker,
and Members of the Subcommittee, thank you for the opportunity
to testify on the State of competition in the airline industry.
My name is Ganesh Sitaraman. I'm a professor at Vanderbilt
University and the New York Alumni Chancellor's Chair in Law. I
also direct the Vanderbilt Policy Accelerator. I'm the author
of a textbook Networks, Platforms & Utilities, which covers the
transportation sector, among others, and a popular book called
``Why Flying is Miserable: And How to Fix It,'' which offers a
history of airline regulation and deregulation. I've also
coauthored some white papers on this topic as well.
My testimony today draws on this scholarship, and it
represents my personal opinions, not the views of Vanderbilt
University.
Air travel is one of humanity's extraordinary achievements,
and it has become essential to modern life and commerce. The
people who work in the industry from baggage handlers and
customer service representatives to air traffic controllers,
flight attendants, and pilots do us all a great service in
making air travel possible. I believe it is essential that we
have an air transportation system that is stable and resilient,
that is competitive, that provides access across the country,
and that treats passengers fairly. Regrettably, I do not think
we are meeting that standard today.
First, stability and resilience. The airline industry
suffers from cycles of boom and bust, with dozens of
bankruptcies and repeated taxpayer bailouts.
Second, competition. The airline industry is less
competitive and more consolidated than in the past. At some hub
airports, a single carrier can now have 60 percent, 70 percent,
80 percent market share. More broadly, the four biggest
airlines today have a larger market share than they did in
1977. This is an astonishing fact. We have less--we have more
competition--sorry, less competition today than we did during
regulation.
Third, geographic access. Smaller communities and mid-sized
cities are losing service. Big carriers abandoned dozens of
cities during and after COVID-19. Airports that once had
multiple airlines and daily flights now struggle. Some places,
like Cheyenne, Wyoming, have been forced to agree to subsidize
highly profitable airlines to ensure they get even a minimum
level of service.
And fourth and finally, there is the thing everyone knows,
and that is that the passenger experience is often miserable.
Seats are smaller, fees have proliferated, pricing is getting
more complicated and less transparent, connections through
giant hubs are stressful, and of course less competition and
limited service make it all worse.
So my message to the Subcommittee is this. The airline
industry is not resilient enough, it is not competitive enough,
it is not serving the public or national interest well enough.
Addressing the problems in this sector requires understanding
how we got here, and in my written testimony, I described the
history of this sector and some of the dynamics that create a
tendency toward consolidation and concentration. The key lesson
from this history is that without pro-competitive, pro-
resilience, pro-growth, and pro-passenger rules, this industry
will never meet the high standard our country needs for this
critical infrastructure.
But I come with good news too, and that is that you have it
in your power to fix flying. On stability and resilience, you
could require airlines to develop resilience plans or rainy-day
funds. On competition, you could expand access to gates and
reduce hub concentration. On geographic access, you can drop a
draft pick plan as the one I've proposed so bigger airlines
will serve small cities at affordable prices. And you can
improve the passenger experience by setting minimum seat sizes,
making it cheaper for parents to fly with infants, preventing
AI-enhanced personalized and dynamic pricing, and giving
passengers the ability to sue airlines when they engage in
abusive practices. In short, flying might be miserable today,
but it doesn't have to stay that way.
Thank you for holding this important hearing, I welcome
your questions, and I look forward to working with you to
ensure the United States has an airline industry that meets our
national needs and that is thriving, stable, and competitive.
[The prepared statement of Professor Sitaraman appears as a
submission for the record.]
Chair Lee. Thank you very much.
Mr. Anderson, let's start with you. We are now going to go
through 5-minute rounds alternating between Republicans and
Democrats in order of seniority, subject to the early bird
rule.
But Allegiant frequently operates in a way that connects
smaller airports to, among other things, vacation destinations.
I know a lot of your routes pretty well because you are
courteous enough to fly out of Provo Airport, and that is where
I live, and that is fantastic. And you happen to fly to a
couple of cities where my adult children live, and so that is
very helpful. But very often you are connecting these smaller
airports to vacation destinations or places where they
otherwise need to travel. What headwinds have you had as a
smaller, kind of more low-cost carrier in trying to gain scale
within that market?
Mr. Anderson. Senator Lee, thank you for the question.
We're really proud of Allegiant, and the model that we've
developed and invented over the years, as you mentioned, we
provide small and medium-sized communities service. We serve
more cities than nearly any other carrier in the United States,
and that's at low fares and nonstop. That's the value that we
provide. And we feel we have the opportunity to continue to
grow our model and expand our service to other like
communities.
And to specifically your question, some of the barriers
that we have faced, I mean, when you think about just typical
costs, and is--are we able to stimulate demand in a particular
market? But outside of that, it's we're looking for ways to be
more efficient, and we--we're really excited about some of the
measures that we've seen from like the ATC modernization
program. We think that will help for Allegiant to continue to
expand its service. We also think the gate access bill is--
items like that where we can go into these destination airports
and have more of an opportunity to connect smaller and medium-
sized communities into those larger airports.
Chair Lee. Right. And gate limitations often impose burdens
for an up-and-coming, you know, a new market entrant.
By the way, on that topic, during the COVID pandemic, the
U.S. Congress doled out I think it was about $54 billion to the
industry as a whole. How did that impact market share or your
ability to break into the market? Did that have an impact on
your ability to gain market share, or did it diminish it? No
effect?
Mr. Anderson. Thanks for the question, Senator. I would
say--I was the CFO at Allegiant during the time of the
pandemic, and it was a challenging time and very appreciative
of the CARES Act funds that were provided to airlines during
such time. Given Allegiant's unique model in the communities
that we serve, actually during the pandemic there was a period
of time where we were the fourth largest carrier in the United
States. I want to say it was May 2020. But overall, we were
able to navigate the pandemic I think relatively as well as
anybody, and we appreciate the support that the Government and
leadership that the Government played at that time.
Chair Lee. Mr. Biffle, some more questions. What headwinds
have you faced at Frontier as you have tried to gain scale
within the market?
Mr. Biffle. Yes, thanks. Thanks. Look, we've faced all
types of issues with scale. I mean, obviously, the gates that I
mentioned is a major factor. Also--and I mentioned to you re-
accom. You know, prior to all the consolidation, it was common
practice, as it is most parts of the world, until consolidation
in the United States, where, you know, if I cancel a flight or
someone else cancels a flight, we would take those customers at
whatever they paid if there are seats left last minute so that
people aren't convenienced. It was kind of--inconvenienced--so
it helped. So that hurts experience.
But one of the big things on scale beyond the gates is
actually just the loyalty programs. When you look at the
subsidization that is going on of the big credit card companies
to the big airlines, it's massive, and it exceeds, in almost
every case of the big airlines, all their profits. And they're
using those profits to actually subsidize basic economy. So
you're taking credit card interchange and interest rates,
subsidizing basic economy, allowing them to dump cheap prices
and compete----
Chair Lee. For the loyalty programs and the credit card
programs----
Mr. Biffle. Yes, I mean, if they didn't have this massive
subsidy that they're getting from that, they wouldn't be able
to flood the market and dump prices like that. I mean, it's--
you're creating an economic situation that is completely driven
by their size and scale. And once you get to a dominance--I
mean, he mentioned, I guess it was Charlotte, 88 percent. You
know, your problem is, if you're in Charlotte, you're kind of
beholden to them. You have to play the game. But it's the
biggest dupe on those people too. I mean, the odds of them
getting upgraded, they're--I mean, when they look on their
upgrade list, they're probably number 76 on the upgrade list.
They're never going to get upgraded to first class. So a
carrier like us, I mean, our elite customers, 80 percent get
upgraded. Eighty percent get upgraded to our European business
class upfront plus product. Compared to the big guys, I offer
better value, but I just don't get the scale because they're
able to subsidize it with these credit card programs.
Chair Lee. Right. And that is one of the inevitable
realities of this industry or any other industry where there is
a network effect. The bigger your network, the bigger the draw,
the more capable you are of having a credit card program or a
rewards program that allows you to do that.
Mr. Biffle. Yes, and so when you get into position, you
control the gates, you control the re-accom, you control the
ability to be able to be on time. I mean, you control the
ecosystem with the loyalty. I mean, it's pretty rigged.
Chair Lee. Okay. I see my time has expired. I have got a
lot more questions. We will hope to do multiple rounds today.
We will turn next to Senator Booker.
Senator Booker. I am going to do the prudent thing and
defer to the Ranking Member of this Committee, who has a lot of
power and authority over me.
Senator Durbin. Oh, the power of this Committee. Thank you
very much, Cory. It is great to be with you all, and I was just
sitting here jotting down. I have been in Congress for 43
years, 50 round trips a year, 2,000 flights, millions and
millions of miles. Maybe this is my subspecialty that I have
developed over the years.
But I do find a couple things interesting. First, I want to
shout out to Northwest Orient Airlines, long gone, the only
airline that publicly supported my effort to ban smoking on
airplanes. Air Canada had already done it, but the majors would
not. They were afraid to take the heat, and they were glad when
it finally passed.
But the thing that I found interesting--Mr. Biffle just
referred to it in his answer to Senator Lee's question--is one
element that I would like to discuss for a moment. When they
got us in our seats with all the safety warnings--and God bless
the flight attendants, I love them all--and they got you
buckled up, and things have quieted down in the cabin, what do
you hear over the microphone? A pitch for a credit card. And
then next thing you know, the flight attendants who are focused
on safety are walking the aisles trying to pass out brochures.
Why? You have said it. For many airlines, there is more money
made on the rewards and loyalty program than on air operations.
In fact, these planes are flying banks with Visa and
Mastercards in them, and the airlines make their money off of
the loyalty programs.
What percentage of airline travelers participate in a
loyalty program? Any idea, Mr. Biffle?
Mr. Biffle. I don't know the national average, but I can
tell you that, you know, dollars per passenger, I mean, we have
a program ourselves, but it's a few dollars a passenger. The
big airlines are $25 to $40 a passenger is generated from
credit card revenue. It's massive.
Senator Durbin. 82 percent?
Mr. Biffle. 82 percent--or----
Senator Durbin. Airline passengers participate in a loyalty
program?
Mr. Biffle. Oh sure, yep.
Senator Durbin. What kind of law is there that regulates
the frequent flyer programs so that the airlines can't just
dump your miles that you have accumulated over years and years?
It is a trick question. There is none.
Mr. Biffle. Yes.
Senator Durbin. So I introduced a bill called the Protect
Your Points Act, which just answers the basic questions. I am
going out of my way to save up all these frequent flyer miles.
Are they worth anything? Can they cancel them all tomorrow? Do
they owe me anything? Do they have any value to them? For a lot
of people, this is a big investment. They make a decision on
when and whether they are going to travel based on whether they
can use miles or win miles in the process. What does it do to
your competition at Frontier?
Mr. Biffle. Well, so it helps us to a degree, but it harms
us in that we just don't have the scale, right? So if I had
access to the big airlines networks, the same credit card
someone used would get them more places they could fly, as an
example. We are doing things to innovate, like we're
introducing a first-class seat so people can get upgrades and
so forth, but again, I just don't have the scale, so I don't
get that benefit.
Again, having--I made the comment a while ago, people will
get much more value from my card, but I'm small, so it's hard
to convince people and market it. Once you get into that
behemoth status, it's hard to stop that kind of momentum.
Senator Durbin. I have learned the hard way what it takes
to get your name in lights at DCA, just to introduce a bill
that addresses the interchange fee and the swipe fee on credit
cards, and they will have a sign that says ``Stop the Durbin-
Marshall Amendment.'' Do you have any idea what the interchange
fee is that you are collecting or paying?
Mr. Biffle. It depends upon the--you know, the network, but
we pay as little as 200 basis points, as high as 300 depending
upon who it is. American Express is one of the highest.
Senator Durbin. Obviously, the major airlines look at my
bill with Senator Marshall like the devil hates holy water, the
idea that there would be some competition on the swipe fee or
interchange fee, and that is to the benefit of consumers,
ultimately, if we can do it.
I would like to ask you as well, when you look back over
time, you have been involved with a number of airlines on the
safety issue. Can you make any comment on the pilots and the
availability of them and the shortages and pilots that we are
running into with many airlines?
Mr. Biffle. Sure, So fortunately, the pilot shortage that
we had a few years ago has now kind of dissipated. It could
come back at some point. I think the main concern we should
have with pilots is the availability of quality training and so
forth, and there's a lot of data-driven things that we can do
and simulations that can get them there, and I think we should
spend time looking at, you know, the data we have, even once
they're on the line, and--because you've got Folkwood Data as
an example where you can monitor bad habits of some versus
others. I mean, we can--in every one of these incidents--take
the Colgan incident and many of the others. There were plenty
of predictors. Had you been following those pilots before, you
would have seen that there--these habits were there before. And
so a simple 1,500 arbitrary rule is not how you get it. There
are data-driven approaches that you could do to improve safety
with pilots.
Senator Durbin. Thank you. Thanks, Senator Booker.
Chair Lee. Senator Hawley will be up next, but since we
have had a couple of question rounds in there where we have had
some focus by the smaller companies, Ms. Pinkerton, if you
wanted to respond to the smaller carriers before we turn to
Senator Hawley, and I would be happy to let you fill in here.
If not, we will catch you in subsequent rounds.
Ms. Pinkerton. I'm happy to address the gate access issue,
for example, that that is certainly something--you know, A4A
represents large carriers and some smaller ones, and we've
heard from smaller carriers about gate access issues. I think,
though, it's important to remember, No. 1, it's the law that
airports must provide access to new entrants, and there are a
number of mechanisms that enable that to happen. So if you're
going to take a Federal grant, you have to provide access.
Many airports are required to file a competition plan where
they have to spell out exactly how they are going to provide
access. And then Mr. Biffle mentioned the lease agreements.
Lease agreements are another tool that airports have to ensure
that new entrants have access. In fact, there are already use
requirements so that carriers cannot sit on gates that aren't
utilized. If they do that, the airport is well within their
rights to take that gate back.
I think what's important here is that the FAA should be
providing oversight to airports to make sure that they're
enforcing the law that exists, and then if the FAA isn't
providing that oversight to airports, I would say Congress
needs to provide some oversight to FAA.
Chair Lee. Okay. Senator Hawley.
Senator Hawley. Thank you very much, Mr. Chairman. Thanks
to all the witnesses for being here.
Mr. Biffle, if I could just start with you. About 9 months
ago, your chief commercial officer testified to me that
Frontier pays its gate agents bounties to stop paying customers
from carrying bags onto the plane. Is this still happening?
Mr. Biffle. Not at the rate it was. We changed our----
Senator Hawley. Well, wait, wait, wait. What does that
mean? So are you still paying your gate agents to stop your
customers from carrying bags on? You were paying them at least
10 bucks every time you would stop a paying customer from
carrying on a bag, your gate agents to get paid for it. Is that
still happening?
Mr. Biffle. We do offer incentives and commissions----
Senator Hawley. You do.
Mr. Biffle [continuing]. To stop people who didn't pay, not
who paid, who didn't pay.
Senator Hawley. No, you are paying your gate agents, so it
sounds like you are still doing it. You are still paying them
money to harass customers from bringing bags onto the airline
by saying it is too big or it doesn't fit in the little box or
whatever the case may be. You are still doing it. That is your
testimony today? Why?
Mr. Biffle. I don't know that I would describe it that way,
but we do provide incentives.
Senator Hawley. Why would you pay your own employees to
harass your customers? Why is this good business practice?
Mr. Biffle. Unbundling enables us to offer low fares, and
the lower fares, many people could not afford to fly if they
didn't have the lower fare option. But in order for the system
to work, everyone has to be treated fairly, and when people
then--a small percentage----
Senator Hawley. Wait a minute. Why are you paying your
agents? This has got to be the only business in the world I
have heard of that pays your people to harass your own
customers. These are customers who have purchased a ticket.
They have a carry-on bag, and you are paying your people at the
gate to stop them and say your bag is not quite right. It
doesn't fit in this.
We heard testimony. The Permanent Select Committee in this
Senate has done a thorough investigation of this. We heard
testimony from numerous of your customers saying they were
wrongly stopped and harassed. There is no appeals process.
There is nothing. You are making gobs of money on it. You
generated $40 million in fees on this according to your own
data. That is amazing. And you are still doing it. I mean, in
what world is this defensible?
Mr. Biffle. It's fair.
Senator Hawley. It is fair to whom?
Mr. Biffle. Well, you continue to insinuate that they paid
for their bag, and they did not pay for their bag.
Senator Hawley. They paid for a ticket that allows them----
Mr. Biffle. They paid----
Senator Hawley [continuing]. To have a carry-on bag, and
you are paying your agents to harass them to stop them from
carrying it on. You know, the only other airline I know of,
Spirit, was doing this, and they stopped because they said it
was a terrible experience for the customers. Your customers
hate it. This is one of the reasons they hate to fly. I can't
believe you are still doing it. How much money have you made on
it this year so far?
Mr. Biffle. Considerably less, if you will let me speak.
What we did is we introduced the New Frontier. We have very
simple branded choices, complete transparency.
Senator Hawley. Wait a minute. Wait a minute. First of all,
you are not a victim here, Mr. Biffle, okay? You are making
billions of dollars, and you are treating your customers
appallingly badly. And the fact that you are still paying your
employees to harass your own customers, I think, frankly, is
unconscionable. I said this 9 months ago. I thought for sure it
would have stopped by now, but I can't believe you are still
doing it. So I don't feel sorry for you one little bit. In
fact, I think you should apologize right now to all of your
customers for what you are doing to them. And I think you
should turn around and give them back the money that you have
taken by forcing them to surrender their bags and pay extra
fees after they have already paid a price.
I mean, I don't get it. You know, you seem to be totally
baffled by this. You think that this is just fine.
Mr. Biffle. I'm not baffled. I think it's--you're
insinuating that they paid for a bag that they didn't pay for.
Senator Hawley. No, I am insinuating----
Mr. Biffle. It's----
Senator Hawley. I am not insinuating anything. I am
accusing you, actually, of doing something that I think is
wrong, of incentivizing your own employees to treat your
customers badly. And the money you are making on it is
astounding, just astounding, $40 million in fees. 62 percent of
your revenues come from these ancillary fees, of which these
additional baggage fees are part of it, and you just seem to
see nothing wrong with this. I mean, do you not understand that
this is why people hate to fly? They hate that they are treated
terribly when they go to the airport by airlines, and you are
paying your own people to do it. Do you want to say anything to
your customers or to the flying public?
Mr. Biffle. I think we've made huge progress in this area
this year. We have introduced--as I started to say, we've
introduced an economy product. That product is for $20 to $30,
gives you free change fees, free seat assignment, carry-on bag.
The persons that you're discussing are the people who bought a
basic product, not that product, and they didn't pay for it.
Senator Hawley. Will you commit to quit giving incentives
to your employees to stop customers and take their bags away?
Will you stop that? Your other airlines have done it, your
competitor airlines, your peer airlines. Will you commit here
today to stop paying your employees to harass customers?
Mr. Biffle. Can I ask a question?
Senator Hawley. I would like an answer to mine first.
Mr. Biffle. I--we will look at that, but I don't----
Senator Hawley. That doesn't sound like a yes or a no. Can
you just say, yes, we will stop paying our gate agents to
harass our own customers over their bags?
Mr. Biffle. We are not harassing customers.
Senator Hawley. Yes, you are. And I invite you to read the
report by the Permanent Select Committee of this body that
investigated this and took testimony from your customers.
Indeed, we took testimony from your own executives on this.
This is a reality. Or, alternatively, you could go out to DCA
here and go and ask some of your customers how they feel about
it. I know what they will tell you. They will tell you what
they told us. They hate it. They feel badly treated. They feel
like they are treated like cattle, and you are making tens of
millions of dollars off of it, and I just think that is wrong.
I just think it is ridiculous.
I have got a lot more questions for you, but I know other
people want to ask questions.
Chair Lee. Thank you. Senator Booker.
Senator Booker. Professor Sitaraman, first of all, my tone
will be different than Senator Hawley's but the same energy. I
want to bring that to you for that hair, the same negative
energy there, sir. I just want to stipulate that for the
record. Okay? Are you ready for me?
Professor Sitaraman. I'll trade you an inch of hair for an
inch of height if we can make that deal.
Senator Booker. We might have a deal. We might have a deal,
sir. Okay. I would like permission to treat the witness as
hostile.
Sir, I am really concerned about Americans who don't have
access to air travel because of where they live, and I want to
know how can we ensure that millions of Americans who don't
live around major cities can have access to reliable, efficient
flights and that the airlines themselves stay afloat. Can you
give me your perspective on that?
Professor Sitaraman. Well, thanks, Senator. I agree this is
a big problem, and I think the core thing to start by
understanding is why this happens. Why are small cities, why
are mid-sized cities losing air service? And I think there's
really two reasons behind it. The first is that in some places
it is uneconomical to serve. The volume of passengers is very
small, and it's costly to fly. And in those places, it's not
going to make sense for an airline to serve unless they get a
subsidy, or unless there's a requirement, a kind of duty to
serve like we have in other areas of law.
The second reason is because of consolidation. As a number
of people have mentioned already up on this witness stand, and
as has been mentioned by Senator Lee, this is an industry in
which there are network effects, there's economies of scale,
and there are barriers to entry. And those things create
tendencies toward consolidation and concentration, and when you
have that, there's an incentive for airlines to focus their
operations in bigger and bigger cities. That's why we have the
hubs that we have, and that often means de-hubbing certain
places or reducing service to others. And I think this is a
serious problem because we have an airline system that is
essential infrastructure for our country. It provides----
Senator Booker. And you in your testimony go into that a
lot, and you speak actually I think quite persuasively about
the economic benefit to our country as a whole when you ease
transportation. Roads, we don't not pave roads to areas. And
you almost say that it should be almost like a utility and that
kind of obligation. Is that correct?
Professor Sitaraman. Yes, that's right. And if you think
about it this way, would you ever start a Fortune 500 company
in a city with no air service? You wouldn't do it. If you were
an entrepreneur with a great idea, a kid growing up----
Senator Booker. But we have even seen VC dollars far more--
if you have a direct from Silicon Valley, VC dollars more. That
is how vital it is that people won't even necessarily even
invest in businesses that don't have that. There is a
correlation, I should say, maybe not a causation.
Professor Sitaraman. And that's why this is basic
infrastructure. And I think that what we want as a country is
for people who grow up anywhere to have opportunities.
Senator Booker. But your solution to that is for Congress
to act.
Professor Sitaraman. Yes, I think that's right. So the
current solution that we have right now I don't think is
working, and that's the Essential Air Service program. It
provides a subsidy to a number of very small cities. But these
are very, very small cities, and they don't include a number of
other places that have lost service in recent years.
I think one proposal that I've put forward, and these are
ideas that I think should be debated, is what I call the NFL
draft-pick model. And the idea is that the biggest airlines
would be like the teams. There'd be a bunch of cities that
would be like the players. And the airlines would have to pick
cities that they want to serve, would go in order, until all
the cities are covered. And they would have to have affordable
access.
Senator Booker. Right, and I am just going to interrupt you
because I want to get one more question before my time. But it
is this concern I have about the hollowing out of certain
communities because of consolidation. We have talked about in
the agricultural sector we have seen entire businesses being
killed in towns that are the connective tissue of our country.
And I think this should be one of the things we should be
looking at when these towns and communities lose air traffic,
they lose economic investment, they lose opportunity, and many
times they lose out on what adds--how should I say it? It adds
vibrancy to a community.
I just want to shift, Mr. McGee, to you really quickly in
the remaining time that I have. Can you speak to me about an
idea that I really believe in, which is this idea of passengers
have fundamental rights and what Congress could do to better
protect passengers who still often report very bad experiences?
I think that Senator Hawley was scratching at that as well--
well, maybe not scratching, but pounding at that as well.
Mr. McGee. Yes, thank you, Senator. The fact is the United
States lags much of the world in terms of passenger rights.
This is the standard operating system in the European Union,
United Kingdom, Canada, India, countries all over the world,
that there are mandatory rights in terms of what you--how you
will be compensated when there is a flight delay, a
cancellation, mishandled baggage.
Here in the United States, we greatly allow airlines to
police themselves. They write contracts of carriage written for
and by themselves, and we adhere to them every time we swipe a
credit card and buy a ticket. Now, the fact is that the irony
is the largest U.S. airlines--Delta, American, United--if
you're flying on them and you encounter a problem, a canceled
flight or a delay on foreign soil, you will be treated much
better than on American soil. So if you're on Delta and your
flight is canceled----
Senator Booker. And I want to----
Mr. McGee [continuing]. You want to be in Brussels, not
Atlanta.
Senator Booker. I want to just be respectful of Senator
Moody, but I just want to say because there is so much
bipartisan space and I am not trying to be partisan, but the
Trump administration has rolled back some rules that would have
given passengers transparency. Can you talk about the actual
impact for American consumers of that?
Mr. McGee. It would be devastating. As I said, we already
lag much of the world, but the few existing protections that we
have, as I said, Airlines for America issued a 93-page
suggestion to the DOT, and unfortunately, it seems like this
DOT is adhering to it. It would be devastating. Right now,
they're doing it in a request for further information. We and
others will be weighing in. But we should all be on guard that
if you think air travel is problematic now, it will be
absolutely awful a year from now if the DOT rolls back the
provisions that we already have.
Senator Booker. Thank you, sir.
Thank you, Mr. Chairman.
Chair Lee. Senator Moody.
[Off mic.]
Senator Booker. Microphone. And I am sure he spends more
money on product than you do.
[Laughter.]
Senator Moody. For sure. You can give me your tips later.
Thank you for being here today, very important hearing,
very important hearing. One of the things that we struggle
with, I think, specifically in the airline industry is the
understanding--as I come at other industries--coming from as
attorney general, one of our big challenges was we had consumer
protection laws. Many of us had antitrust divisions. And when
you are approaching mergers, acquisitions, you are always
trying to make sure that there is meaningful, true competition,
while at the same time making sure you are never, as a
Government, selecting the winners in a market because that in
of itself negates meaningful competition.
And I was very frustrated with a particular case in the
sense that we have--for those that don't know--and the American
people that may be watching, we have legacy airlines, we have
low-cost airlines, and then we have ultra-low-cost airlines.
And we have two of our ultra-low-cost airlines with us today.
Is that how you would describe yourself? Is that your----
Mr. Anderson. Sorry, Senator, we like to refer to ourselves
as value airlines, but----
Senator Moody. Value airlines.
Mr. Anderson [continuing]. It is a common----
Senator Moody. Okay.
Mr. Anderson [continuing]. Term that is used, ultra-low-
cost carrier.
Senator Moody. So my concern is, once you come into the
market as a new player, and let's say you come in as a value
airline or even a low-cost airline, do you think that you have
to stay there for the duration of the existence of your
company?
Mr. Biffle. Is that----
Senator Moody. Just answer, either one of you.
Mr. Biffle. Well, it is not uncommon for airlines to
evolve. Probably the best example today is Southwest, started
out as low-cost, and they are now evolving to offering and
suggesting that they may have either other legacy or big
network attributes if that makes sense.
Senator Moody. Yes, so I was very frustrated under the
Biden administration when the Spirit and Jet Blue announced
that merger, and by the next March, Florida came in and looked
at that and said very clearly, we can make sure we have better
capacity, better flights, ensure competition. We announced a
settlement. This was only probably about 6 months after the
announcement. And the next day, DOJ announced they were going
to fight, and they were going to block that, the next day. It
showed very differing philosophies on how to ensure competition
and ensure that Government was not picking winners and losers,
very different philosophies.
And the reason we worked so hard on that settlement and
announced that settlement was because we knew that one of those
players was in financial jeopardy, and this was going to be a
way to make sure that consumers could still take advantage of
that capacity. And it might even present more competition for
legacy airlines. I mean, that would be new, right, and
something we would all want to see. And within a year, because
the DOJ under Biden fought that, that was blocked. And then, of
course, what we expected, Spirit filed bankruptcy. I think now
they are on their second bankruptcy. I think I would like to
ask Ms. Pinkerton, how can we ensure that Government is not
placing a finger on who wins and loses in competition among
airlines?
Ms. Pinkerton. Well, without addressing--I can't address
your specific situation that you're talking about there, but I
believe that something that is definitely an issue for all
airlines are certainly what we're calling cost convergence. So
we're seeing increased airport costs, we're seeing increased
labor costs because we're paying our employees more, and we're
seeing increased regulatory costs. So I think it certainly
wouldn't be tipping scales to say we shouldn't be imposing
additional costs on the industry, and also what can we do for
the entire industry?
As I have said in my testimony, I really think a broken air
traffic control system and an air traffic controller shortage
is the most significant threat to competition because we're
flying 10 percent less today because we don't have adequate
controllers and adequate infrastructure. So that's my--that's
our policy suggestion.
Senator Moody. If I had more time----
Chair Lee.
[Off mic.]
Senator Moody. I do? Thank you. Since it is so specifically
related to antitrust, can I ask our value-based airlines if in
fact you were facing a situation where you were dealing with
the financial health of your company, and the only way to
continue to provide service and capacity was to evaluate
merging, do you believe Government should work with the
stakeholders in order to ensure that you can continue in
existence, or do you think that they should block you out of
some sort of----
Mr. Biffle. Well, I would say that----
Senator Moody [continuing]. Protection of----
Mr. Biffle. Well, I think----
Senator Moody. Maybe protection of legacy carriers.
Mr. Biffle. Let's go back to the Spirit--let's go back to
the Spirit-JetBlue example. Having been around the industry for
three decades, I was shocked. I mean, we created a system of
the Big Four controlling over 80 percent of the market, and
then two of the small players were trying to get together. I
mean, I found it laughable that anyone would think that was
something that should be stopped. In fact, I would argue that
all of the other small carriers--and just stop and think about
this. All of the non-Big Four altogether are not as big as one
of the Big Four. You should give all of us antitrust immunity.
Like your job should be to say, if I really want to fix these
things, what should I go do? You should give us all antitrust
immunity. You should give us not lip service about the gates.
I'll give you real examples about gates. I should tell you
about some horror stories about things that have happened this
summer in Atlanta. I take real exception to being--that the
answers are that I should be fined or do things when the
reality is the system's rigged against us. You fix the gates.
And I think you need to look for scale things that you
could do on the mileage programs. Example being, you know, one
of the things you could do is give value carriers like us, our
mileage programs, access to the big airlines' networks at the
cost that they charge themselves for miles. I mean, there's
some real remedies that the Government should do to correct
what we now all recognize has been bad for consumers, and
that's allowing the Big Four to control the market.
Senator Moody. We had a low-cost airline trying to merge
with a value-cost airline so that one could stay in existence--
--
Mr. Biffle. Yep.
Senator Moody [continuing]. And the Government said, nope,
we are the Government, we are going to block that, and then one
had to file bankruptcy. I just don't know that that has
resonated with our policymakers or our lawmakers. Hopefully,
this administration takes a new approach to ensuring true
meaningful competition. That is my hope. I am seeing very good
signs out of this new administration.
But I do think we need to not lose sight of the fact that
exactly what I knew it was going to happen, happened. And we
can't keep this up if, in fact, we are trying to keep costs low
and travel possible for all Americans.
So thank you so much.
Senator Booker. See, you could have taken more time. The
Chairman was distracted for a moment by his incredible staffer
behind him.
Chair Lee. We were just commenting on how outstanding your
questions were.
[Laughter.]
Chair Lee. All right. Ms. Pinkerton, let's go back to you
for a minute. You noted that air traffic control systems cost
the economy about $25 billion annually in delays. That is every
single year. That is nothing to sneeze at. That is a
significant thing. That is, I assume, taking into account the
economic cost.
Ms. Pinkerton. Of time.
Chair Lee. People, yes, sitting where they would be moving.
So what impact do you think the modernization of air traffic
control might have on that problem and on the market as a
whole?
Ms. Pinkerton. In fact, I heard Administrator Bedford at
the U.S. Chamber a couple of weeks ago say that he thinks the
economic benefit--I'm going to get his numbers wrong--but could
be anywhere from almost $1 trillion over time because we're
not--you're not just stopping the delays and cancelations,
you're building the system and allowing for more growth. And as
you know, we drive 5 percent of the GDP, et cetera. So it's--
I'll get back to you on the exact--his exact numbers, but it is
an enormous potential for economic benefit.
Chair Lee. Okay. Because otherwise, you are just talking
about delays, just delays because of administrative limitations
on our ability to direct air traffic, whereas if we modernized
it, you would have fewer of those.
Ms. Pinkerton. Fewer of those and the ability to grow----
Chair Lee. Yes.
Ms. Pinkerton [continuing]. Instead of shrinking, which is
what we're----
Chair Lee. Right.
Ms. Pinkerton [continuing]. Doing right now.
Chair Lee. Right. So right now, we are acting as if the pie
were limited or even a shrinking pie.
Ms. Pinkerton. Correct.
Chair Lee. Yes. We have been forced into that. Okay. Thank
you. That is very helpful.
Mr. Anderson, I want to go back to you for a second. In
your opening testimony, you talked about some of the benefits
of international joint ventures. Talk to us about that. And you
know, do you see the Caribbean, Canada, or Europe as additional
markets that could benefit from value, ultra low cost, whatever
you want to call this niche of the market, joint ventures going
on in that area?
Mr. Anderson. Senator, thank you for the question. We
applied about 1,400 days ago for antitrust immunity with Viva
Aerobus down in Mexico. And Mexico was the largest transporter
international market. And what that was--what we were asking
for is the ability to scale in size and compete with some of
the larger carriers, the international carriers that--such as
the legacy carriers that have these antitrust immunities. And
so by----
Chair Lee. You mean the immunities in connection with the
international co-chairs?
Mr. Anderson. Right, with partners. For example--well,
there's several examples, I think dozens of them that exist
today, international being a very important part of obviously
the travel ecosystem. What we were looking to do was provide
direct nonstop service from those communities that we serve
that currently do not have it into some of those Mexican
beaches such as Cancun, Cabo, or Puerto Vallarta and to do it
at lower fares.
Chair Lee. What is the biggest impediment to that? Is it
regulatory, or is it something in the market itself? In other
words, is there a regulatory reason why it is harder for them
to do it, or is it just less attractive for them to go to all
the work to do it with a smaller carrier?
Mr. Anderson. I think for us, our view is partnering--
entering in the international market such as Mexico for
Allegiant, partnering with somebody like Viva, who has the
know-how and experience in that market, we think will allow us
to scale in size and be more successful when we go up against
some of the larger legacy carriers in the similar markets.
Chair Lee. Is there also a part of the limitation that has
to do with the airports that you fly? A lot of the airports
that you service are not currently international airports. Does
that contribute to the problem? In other words, do you have to
have presence from, I guess it would be CBP, at that airport?
Mr. Anderson. Yes, not all of our airports, given some of
the communities we serve, have FIS clearance, which would allow
for clearing customs, but there is a significant number of our
airports that do, that we could fly or add direct nonstop
service into those Mexican beach destinations.
Chair Lee. Okay, but that will typically--in order for that
to occur on the U.S. end, you would have to have the
involvement of both CBP and DOT. Is that right? Do both
entities have to approve designating something for
international flights?
Mr. Anderson. My understanding--and I apologize if I'm
incorrect on this, but we are just waiting--or it's for the DOT
that would approve.
Chair Lee. DOT is the one----
Mr. Anderson. Yes.
Chairman Lee [continuing]. That approves it. Okay. Got one
other question, and then we will turn to Senator Blumenthal.
Mr. Biffle, a moment ago you took me off guard when you
said maybe we should have all airlines, regardless of size,
legacy, value, ultra value, or whatever you call yourselves,
should have full antitrust immunity. I did not expect that.
That was not on my bingo card for today's hearing, particularly
from a smaller carrier. Tell me why you say that and why you
think that would enhance the state of competition in the
industry.
Mr. Biffle. Well, I took this hearing very seriously. I was
flying out last night, and I thought about how do you get it
where the small carriers can compete with the Big Four? And I
came up with a couple of solutions, and I think that's one that
would be very powerful. I'm not saying antitrust with the Big
Four. I'm saying everybody else should work together to provide
a real forcing mechanism to provide competition to the Big
Four, and that would be a great way to do it.
Chair Lee. But if nobody is subject to the antitrust laws
at that point, the skeptic would say that is going to foster
collusion.
Mr. Biffle. Well, help me out with it. I mean, so a quarter
of the market is controlled by one. There's three other
carriers that are around the 20 percent mark. You've already
got 20 percent being controlled by one entity. What's your
problem with the small guys controlling 20 percent?
Chair Lee. I mean, one could argue that, moving forward,
what that would do with respect to future proposed mergers and
acquisitions, I mean, particularly if you are talking about
full antitrust immunity from the full panoply of antitrust
laws. There is no reason why you wouldn't see even more
consolidation than we have had up until this point.
Mr. Biffle. I don't know if you'd see more consolidation,
but you'd see us work together better in airports, and you've
got--let's take gates. You've got finite resources. If Greg and
I were able to work together, our teams work together on
coordinating schedules so that we better mash up our schedules
so that we both run a better reliable operation in fill-in-the-
blank city, the big airlines get to do that.
So I'm saying you've got a massive problem in this country
where the Big Four scale is pushing down competition. If you
want to give us a level playing field, give us a level playing
field on the gates, give us a level playing field on
competition, give us some kind of remedy to solve against the
loyalty and the credit card. I mean, that was my other
suggestion is give our credit card customers access to the big
networks at the same cost that they booked for themselves in
their accounting. So I'm just giving you real solutions. Look,
I took it serious. You want more competition in the country,
and I'm telling you these are things that are big issues.
And I would throw you one more that's very low cost, much
cheaper than the modernization of ATC and not well understood.
When you have--look, we're going to have weather, especially in
Florida, right? And so there's limited corridors, and we can
modernize, but I don't think a lot of people realize that
general aviation can manipulate the ATC capacity. So a private
jet can actually go in, and when we have a scheduled flight at,
say, 11 a.m., I can't file a flight plan for a different time.
I have to file the flight plan for my scheduled time, right?
So let's say Mr. Blumenthal has a private jet. He wants to
fly at 11. Maybe he doesn't, but I'm just saying, say he did,
you know, as an example. Well, what his pilots----
Senator Blumenthal. From your lips to somebody's ear.
Mr. Biffle. Right. Maybe it's somebody else, but I'm just
using it as an example. So his pilots know he wants to go at
11. They know there's a 3-hour ground delay program. Well, his
pilots will just file for 8 a.m. He shows up at the 11, never
knows the wiser, they go take off.
Meanwhile, I have to go through this airspace a couple
times a day, and I blow up my crew, and then I have to cancel
two flights with a couple hundred people on each. Four hundred
people get inconvenienced so three people could take a private
jet. And this is happening every day in every major storm event
for the Northeast and Florida, and this is what contributes to
thousands of customers being canceled. And this is why I take
real exception to people saying, oh, I should compensate them.
No, I think the Government should step in and look at all the
places that I have to cancel a flight. Neither one of us ever
want to cancel a flight. I don't want to harass customers. I
don't want to cancel a flight, but I want to operate safely.
There's never a time where I'm going to want to inconvenience
someone. There's generally a reason, and I think what you
should look into is why. Why would we have to cancel at a
higher rate?
Take Atlanta. Let's talk about gates. So this summer, true
story, I personally got involved. We had over 10 flights that
had over 3-hour tarmac delays, over three, one 5 hours. I got
on the phone personally with the airport control towers in the
middle of this event because I was so upset about why can we
have this delay. I'm on the phone with them. We had a medical
emergency on a 5-hour delay, medical emergency. Someone would
have a heart issue. We got cleared by the tower to go. Our
plane starts moving toward the gate, and an Alaska plane pulled
in front of us and parked at the gate.
We found out that Delta controls the ramp there, and they
had cleared them. While we're trying to figure that out, Delta
goes and takes another plane at another common-use gate. This
was just happening, and no one else experienced this kind of
event, but we had a couple thousand customers that experienced
over 3 hours, all because we don't have the same gate access.
And while all this was going on--and I take real exception
to your comment earlier about there's rules--Southwest Airlines
has four flights per day, and during that event, during that
event, Southwest gates were open. I had customers and employees
taking pictures, so I've got people even including a medical
emergency----
Chair Lee. Is there an area where they have exclusive
ownership of the gate?
Mr. Biffle. They've got exclusive ownership of the gate,
and their minimum use is only four flights a day in Atlanta.
They can control a gate with four flights, and yet I'm using
the equivalent of 10 to 12 flights. Anyway----
Chair Lee. Okay. I apologize to Senator Blumenthal. I
didn't intend to eat up that much time. You are up to bat.
Thank you. And I will give you all the time you want now, both
because I feel bad, and I want to ride on your plane someday,
so----
[Laughter.]
Senator Blumenthal. You know, I always knew I disliked
those private planes, and now I know why. And just anecdotally,
I fly from Hartford to Washington, DC, pretty regularly, and I
fly in the regular whatever it's called now, class, and every
other flight someone will say to me, ``I thought you guys had
private planes.'' And I know that my colleagues from places a
lot more difficult to get to than Connecticut wish they had
private planes, but we experience the same kinds of travails
that your customers do.
And plainly, we have a lot to learn about how we can
improve this system because it sounds like we are, often to me,
dealing with a system that is decades old, and we have failed
to use the more modern technology on air traffic control, on
the gate system, kind of an archaic rubber-bands-and-glue kind
of system that we have right now.
But I want to focus on an area that Senator Hawley, I
think, introduced, which seems really top of mind for a lot of
flying customers. First of all, you know, for a long time, I
have fought the consolidation of the airline industry, so I am
with you on the level playing field. 80 percent of the market
for air travel in the United States is controlled by four giant
airlines, and the mergers over the last 20 years, and having
produced this consolidation, mean fewer choices for many
people, a worse travel experience, and more nickel-and-dime
fees, one of them being this bounty system. I know Senator
Hawley has asked you about it. Not sure that he had time to
finish.
Last year, the Permanent Subcommittee on Investigations,
which I Chaired, conducted a yearlong investigation of all of
the airlines' approaches to these fees and charges, and we
found that five airlines generated $12.4 billion, $12.4 billion
in seat fee revenue alone between 2018 and 2023. Billions of
dollars more are collected in the bag fees. The Subcommittee
revealed for the first time, the extent that your airline and
Spirit had a bag bounty scheme where those airlines, as you
know, pay so-called bounty to their employees for collecting
bag fees at the boarding gate.
So first, I would like to know--and I think you answered
this--that the practice is continuing. What the justification
would be, what explanation you would have, but also what can be
done about those other fees, the charges for sitting together,
family Members, the charges for the other kinds of services
that are provided when the cost for them to the airline is way
below what is charged, and therefore, it is used as a profit or
revenue center.
I will begin with you and maybe others can answer.
Mr. Biffle. I'm sorry, so there's a lot there. What are the
main questions?
Senator Blumenthal. The main question is, why do you
continue with a bounty fee?
Mr. Biffle. Well, so at Frontier, we want to enable the
most people to fly. We have the lowest costs in the country. We
actually generate the lowest amount of revenue per passenger,
so we're giving more consumers the ability to fly than others.
Unbundling had proven to be very successful in enabling a
lower entry price, and just like you sell a car, there's cars
that--you can buy a Tercel that's stripped down, or you could
buy a fully loaded Cadillac Escalade. And so it has been common
practice in the world to offer a base model and bundle them
back up.
And so what has happened is that if you have a system like
this, if people cheat, it's no different than somebody
shoplifting. I mean, if they go through, take a product, and
the other person is charged for it, that's just not fair to
consumers.
Senator Blumenthal. But just to stop you there for a
moment, I understand the business model, but it seems to me
that if you were to raise your prices just ever so slightly,
you could compensate for the fees that you charge on the bags,
and most important, people would know before they got to the
gate what the charges would be because right now, they arrive,
and some agent at the gate figures they can be rewarded, so
then someone is charged----
Mr. Biffle. Well, let me go back. So, look, I want to be
the most friendly. We believe we've tried to be the most
friendly, and I hope we could agree that that would be right.
So before I answer the question about unintended consequences,
so Southwest Airlines earlier this year announced they're going
to start charging for bags, and we saw this as a major
opportunity. We thought, my gosh, they've spent billions of
dollars to build this brand, and, well, gosh, if it was so
important, these are things people complain about, and so
forth, let's do it.
So we announced that we would adopt free bags, right? And
quite honestly, I was really hoping it would work for all these
reasons. I wish they would. But you know what we found? It
worked for a few days, and we got a lot of publicity, but
ultimately, people didn't want to pay us more. There's what
people say, and then there's what they actually do. And so I'd
love to be as friendly as possible.
So what we've done--I don't want to pay anyone a bounty.
And we've cut it way, way down because I've introduced an
economy product for as little as $20. People are getting a bag,
free change fees, and free seat assignments. And so with that
low price, there's very little cheating going on. But the
problem is, if you don't have some kind--I'd love to figure out
a way to do it. The challenge is, is that everybody will flood
them and not comply, and it's not fair to other people. It's
just like insurance fraud. I mean, it's not a victimless crime.
So I'd love to figure out how to do it and have the best
experience possible because I think we are on the side of the
consumer. People can afford to fly by flying Frontier. So
having said that, we haven't figured out a better solution just
yet. And I even tried to raise the prices a little more, but it
just hadn't worked.
Senator Blumenthal. I don't want to dwell on you, but I
understand your answer.
Let me ask Mr. McGee. My impression is the three largest
airlines raise their bag fees pretty much in lockstep. Is that
a sign of lack of meaningful competitive pressure to charge
lower fees or other ancillary fees?
Mr. McGee. Thank you, Senator. And yes, I think the answer
is absolutely. I mean, what we see with the big three in
particular--American, Delta, and United--not just on fees, but
even on fares, there's no need to signal pricing in this
industry. Everybody sees them in ATPCO, in the reservation
systems, et cetera. They see the prices. They don't have to
have a clandestine meeting somewhere to talk about it, and
there's no question that they're in lockstep.
That's not our opinion. That is stated every--4 times a
year in the DOT's quarterly airfare reports. We were pouring
over the last year's worth over the weekend, and you see that
in--on routes in which the only competition is any combination
of the big three, American and/or Delta and/or United, three,
two, or one of them, you're paying the highest fares in the
country, all across the country.
And, you know, I spoke about the effects of the low-fare
carriers, but that doesn't mean there still isn't a lot of
consumer anger and confusion over fees, and particularly the
transparency of fees. And when you get to the gate, that's not
the time you want to know that suddenly you can't, you know,
bring your carry-on bag with you because that was the deal that
you agreed to.
As I said before, these contracts of carriage, they are
written by and for the airlines. We don't get to say, well,
wait a minute, what about our rights? And so when you swipe the
credit card, you're adhering to it.
Ms. Pinkerton. Senator----
Senator Blumenthal. I was going to say, I'll give you a
chance to answer.
Ms. Pinkerton. Thank you so much. From Airlines for
America's perspective, none of our carriers charge a bounty,
none of our carriers charge a fee for families sitting
together, and none of our carriers are colluding on price. We
are incredibly transparent. That is called competition.
Absolutely, passengers today have more access to fares and the
fee information than they've ever had before. It's ubiquitous.
It's all over the internet. It's not collusion. It is
transparency.
Senator Blumenthal. Let me ask you, because we have had
some evidence that AI is being used to target fees to
individuals based on information as to their past travel and
their ability to afford higher prices and their need to travel
for certain reasons. Can you commit that none of the airlines
that are Members of Airlines for America use AI in that way?
Ms. Pinkerton. In fact, to prepare for this hearing, I
asked the carriers exactly that, and all of them--two A
carriers said, no, they do not use personal information to do
pricing.
Senator Blumenthal. So if I wrote to them, and I intend to
do it, you can guarantee that they would be willing to tell me
that they never use personal information in artificial
intelligence systems to change prices, vary them according to--
--
Ms. Pinkerton. To target a price toward you and using
personal information to target a price toward a person, they do
not.
Now, as I think Mr. Johnson from American told you, if you
want a free bag, you need to put in the fact that you're a
frequent flyer at American. So they do use that kind of
information, but absolutely, they do not use personal
information like have you--did you have a death in the family
or anything like that with AI.
Senator Blumenthal. Well, I don't mean only a death in the
family. I mean, have you traveled first-class on an----
Ms. Pinkerton.
[Off mic.]
Senator Blumenthal. Okay. Well, I don't want to prolong
this questioning, but thanks, Mr. Chairman.
Chair Lee. Thank you.
Mr. McGee. Senator Britt.
Senator Britt. Yes, Mr. McGee, you were shaking your head.
Do you mind responding to that?
Mr. McGee. Yes, thanks very much, Senator. I think the
devil is in the details and in the language, and we really need
to clarify, once and for all, bring in all the airline CEOs and
ask them, please define personal information. It may not say
that Senator Britt or Senator Hawley, that we are targeting
pricing on that, but what it will say is there are algorithms
built into these systems that track how you shop, when you
shop, why you shop, how often you book, how long you're on
there. I think if we all knew----
Ms. Pinkerton. But that's----
Mr. McGee. Excuse me. I think if we all knew what the
airlines knew about us, it would be--it would blow our mind.
And I can tell you that Consumer Reports in 2001, almost 25
years ago, we first stumbled upon this odd thing where we were
doing testing just to see which were the best websites, and we
suddenly found, but wait a minute, in real time doing very
precise testing with identical itineraries, we were getting
different results on different browsers and different
computers. That's 24 years ago. I can't imagine how much the
technology has improved since then.
So we need to clarify, what is it about your shopping
habits? They may not know personal information about you, per
se, but we need to clarify that.
Senator Britt. Thank you very much. Mrs. Pinkerton, I would
like to just talk to you real quick. Alabama's four largest
airports are predominantly served by carriers within your
organization there. Look, we depend on that, the reliability,
the accessibility to these various different markets, and
determines whether or not I get home for my daughter's
volleyball game on Thursday night, or I am back at home in time
for parent dinner with my son and his team. And so, you know,
that just scratches the surface. Every, you know, working
parent or people that are traveling around have things that
they are depending on.
I have a question for you in just the sustainability to
those markets. You know, what are you looking for? And just
very quickly, you know, what keeps those routes open and
reliable?
Ms. Pinkerton. Yes, you--so you've identified small
community and medium community service as being absolutely
essential, and I will say that this network system that the
carriers have developed, hub and spoke, is what enables them to
efficiently, with fewer planes and fewer people, serve those
markets. I talked earlier about the increasing costs, whether
it be regulatory costs or labor costs or fuel costs are all
increasing. So to the extent, you know, that we can help keep
costs down will help continue to see airfares be at all-time
lows. There are some structural issues like----
Senator Britt. Okay.
Ms. Pinkerton [continuing]. Yep, sure.
Senator Britt. And I am running out of time. So just
quickly, what are those structural issues?
Ms. Pinkerton. Structural issues, no one's making a 50-seat
plane anymore, and so----
Senator Britt. Okay.
Ms. Pinkerton [continuing]. You're--you may see less
frequencies in small communities, but you're seeing more seats
because they're flying bigger planes. That's good. And
certainly for small communities, the pilot supply and mechanic
supply has been a problem.
Senator Britt. Okay.
Ms. Pinkerton. What we've seen is the regionals increase
wages for pilots, and that seems to be working.
Senator Britt. And so I think about somewhere like Dothan
that is the hub and spoke, and obviously services our military
community, too, right there, and we obviously do not want to
see that continue to grow.
You know, Mr. Anderson, when we are looking at that--and I
know Allegiant is the only airline that actually services Gulf
Shores International Airport, and I would like to do a little
invitation here for everyone to come to Alabama's beautiful
white sand beaches. I think you will be pleasantly surprised.
We are talking about other destinations here. I think you could
just come right down to Alabama's Gulf Shores. But that has
proven to be wildly successful. When you look at that, I think
you have seen over 40,000 travelers coming down back and forth
to Alabama's beautiful beaches.
Talk to me--and I think you also service Huntsville as
well--about how you added those routes to underserved or new
markets. What were the challenges or the barriers that you face
to expanding? And what is the decision point for continuing
those?
Mr. Anderson. Thank you for the question, Senator. We--as
we evaluate markets, we have hundreds of markets that we look
at regularly. 90 percent of those currently do have--do not
have non-stop service, so it fits our model beautifully. We
focus 100 percent on the leisure customer, which is a price-
sensitive customer, and the value we offer is low fares with
convenience.
And when we've entered into the Gulf Shores and the
Huntsville markets in Alabama, those fit our model beautifully,
and they've been successful, and we're excited about what we're
seeing. We have service from Kansas City into Gulf Shores and
other communities throughout the Midwest. But when we see the
ability to stimulate demand and keep costs low, that's good,
and that allows us to continue to grow our unique model.
Senator Britt. Mr. Biffle, I would like for you to answer
that same question as well, but before I do that, Roll Tide. It
was a big win on Saturday, good stuff.
Mr. Biffle. That was huge, right?
Senator Britt. It really was. My favorite play was the
Kadyn Proctor to the side, number 74, getting the ball. I don't
know if you all watched this, but you should Google it right
now.
Mr. Biffle. Oh, well, my favorite was the look on Kirby's
face when he was walking off the field, but----
Senator Britt. That was something too.
Mr. Biffle. Yes, that was good.
Senator Britt. So tell me, how do you decide about new
markets, and how do you expand those?
Mr. Biffle. So look, we--unlike Allegiant, we're more in--
competitive. I forget, it's less than a few percent of our
routes have no competition. So we tend to focus on giving
consumers a choice in established markets. And so--and our
smallest aircraft is 186 seats, so I have a difficult time,
even though I'm extremely familiar with Alabama and all the
markets there, even Gulf Shores. Some of them are smaller for
us, and so it's more of a challenge for us to serve.
So we typically look at markets that we could fly at least
twice a week, so the minimum market size, if we look at
stimulation and so forth, we're going to be looking for a few
hundred passengers that we think could go per week.
Senator Britt. And what would create an incentive structure
for you to come there? What do you look for in that market?
Mr. Biffle. So we're just looking, you know, is the demand
there from A to B? We do do some limited connections in some of
our bases, but we're typically looking at that local market,
and so, you know, how many people want to go there?
The next thing is, what is the season? Is the season long?
You know, for example, some of these small communities that
have difficulty--I mean, I really feel for these. I'm from
rural Texas, so I understand how a lot of this works too. And
so I know that a lot of communities, they're very seasonal too.
So small, seasonal, it makes it difficult. And so I have a--you
know, I have a soft spot for these places, but the economic
realities oftentimes are challenging for them.
This is where I do and would support some type of EIS, and
possibly needs to be looked at for the size. I think the EIS
needs to be moved up, I think. And also not just size, but just
how hard is it to get there, right? So you've got places, let's
take the Northwest United States. I mean, you get into the
Dakotas and over. I mean, it can get really hard to get
somewhere. I mean, not only do they not have service, it may be
500 miles----
Senator Britt. Yes.
Mr. Biffle [continuing]. To drive to the next place that
might have service, and it's not even great service there. So I
do think there needs to be a more holistic approach there.
But yes, we look at the market size and the potential. Can
it stimulate? And in general, we look at where--in many cases,
where the legacies charge a lot of money. And we--we're
attracted to that.
Senator Britt. Thank you.
Chair Lee. Okay. I have another matter I have got to attend
to, so I am going to hand the gavel off to Senator Hawley, as I
recognize Senator Booker, who will be up next. It is unlikely
that I will be able to return before you have adjourned. I will
come back if you are still in session after then, but I will
leave that in the hands of he who holds the gavel.
And Senator Klobuchar, you are recognized.
Mr. Biffle. Before you leave, Senator Lee, can I clarify
something earlier?
Chair Lee. Sure.
Mr. Biffle. And just to make sure I understood you and you
understood me. When I suggested that we should have antitrust
for the carriers, I mean just the small carriers, not----
Chair Lee. Okay.
Mr. Biffle [continuing]. With the Big Four.
Chair Lee. Okay. Yes, that makes sense.
Mr. Biffle. I'm saying that----
Chair Lee. I was confused by that part.
Senator Klobuchar. Yes, that would create----
Mr. Biffle. Yes, I'm just----
Senator Klobuchar [continuing]. A lot of news.
Mr. Biffle. I'm saying the small carriers that represent
the 20 percent----
Chair Lee. Got you.
Mr. Biffle [continuing]. Could work together to be a force
to compete with the Big Four, not across them. They don't need
any more help.
Chair Lee. Yes. Yes. I thought maybe you were setting
yourself up for an acquisition or something.
Mr. Biffle. No, no, no, no. I apologize. Maybe I spoke too
fast, but I just wanted to clarify. I was just saying, I
think--I'm just, again, looking for practical solutions to fix
the situation so----
Chair Lee. Okay. That makes sense. Thank you.
Senator Klobuchar. Okay. Thank you. I want to thank
Chairman Lee and Ranking Member Booker for this really
important hearing. And I will say that with everything going
on--that is a little bit of a euphemism--today, the fact that
we have had so many Senators here and that they, as leaders,
had so many Senators here show how important this is to people.
So our airport was once again named best in the country.
Yes, you are welcome. But we hosted more than 340,000 planes
carrying 37 million passengers last year at Minneapolis-St.
Paul Airport and, of course, major hub. But it is also really
important for us, being this hub, that we also have competitive
carriers. We are the home of Sun Country, as you know, Mr.
Biffle, and appreciate all of the competitive carriers we can
get.
And one of the things that I have focused on with funding
is to make sure we get gates in what we call our terminal 2,
right, so that we have more infrastructure for competitive
carriers, especially some of these big hub airports. Everyone
is gravitating there, and it makes it more important than ever
that we have competitive carriers. Could you talk about--I know
you have been an advocate for this--but for just the
infrastructure and the gates and how important that is in this
marketplace of competition?
Mr. Biffle. Sure. I mean, look, I mentioned the beginning
and we talked a little bit, the gates are the big thing. And
it's not just having access, but having them at access at the
same rules as the big guys. I mean, you know, we've had
situations--I'll go back to Atlanta. You know, we've operated
on 25, 30 different gates in a week. I mean, like, I could put
my entire operation on seven gates. I mean, so--and that's
across four different terminals. I mean, and you're putting our
people and our employees, our customers, all having to move
around like gypsies. And so it disrupts our operation. We don't
provide as good on time. It ends up causing cancelations of
flights, and people miss their flights because we have these
constant gate changes.
And so, you know, the distinction of pref gates and having,
you know, our fair share of pref gates and the ability to use
them--I know in Las Vegas, we've had challenges--I know
Allegiant has too--with, you know, common-use gates. But it's a
major factor. And I think that it really needs to be looked
into. It's just not a fair system. There are airlines hoarding
gates. Over and over again, there's examples of gates given
back to the airport, airlines like us trying to get them, and
all of a sudden, the legacy carrier in fill-in-the-blank city
all of a sudden just happens to get those gates. And nobody
seems to care. And----
Senator Klobuchar. Well, I think who cares is when you look
at the numbers, right? When low-cost carriers serve a route, it
is 20 percent lower.
Mr. Biffle. Well, I think it has to get to the level it's
gotten for people--thank you for having this hearing--that
we're finally going to get some attention drawn to this and
getting some fair access to gates. It's a major issue, and it
impacts us dramatically. I would say it was the No. 1--after
weather and ATC, it was the No. 1 cause of cancelations for our
airline this summer was gate access.
Senator Klobuchar. Wow. Mr. McGee, do you want to add
anything? By the way, congratulations on hiring Phil, our
former staffer back there.
Mr. McGee. Yes, we're very lucky to get him. Thank you,
Senator. Yes, as I said earlier in my opening remarks, we
praise Senator Hawley for cosponsoring the Gate Competition
Act. We think it's one of the single best pieces of airline
competition legislation we've ever seen.
But I think, you know, we need to give some context, too,
and that is that a lot of times when you walk into an airport
in the United States, you'll see a big sign saying, welcome to
our customers. Let's be clear, we are not--we the traveling
public are not the airport's customers. Airlines are their
customers. And so if you have a situation like you have in
Charlotte where American Airlines controls 88 percent of all
flight departures, it's hard to believe that the airport
authorities are going to equally treat their customers when one
of them is nine out of ten of all flights.
And so this really speaks to the larger systemic problems
that we've had with deregulation. We have a commercial aviation
system that has the best of both worlds. When times are good,
they make money and they keep it and they use it for stock
buybacks and they use it for executive compensation. And then
when times are bad, they come right here, and they ask all of
us taxpayers to bail them out. And so we need to have a bigger
discussion. We're talking about a lot of really important
issues today, but we need to have a bigger discussion about the
systemic problems with deregulation and ways of fixing aviation
once and for all.
Senator Klobuchar. Just one, I know Senator Booker asked
some good questions about that passenger bill of rights and how
we got that passed a while ago out of the Commerce Committee
and, you know, that was a while ago. And so that's why I think
you see us working on some of these other issues like families
sitting together. Could you comment on that one?
Mr. McGee. Absolutely. And we are very grateful to you for
all your work in this area. The bottom line is that it seems we
can never gain any traction. Every time we make any sort of
progress on passenger rights in this country, after I already
noted we lag much of the world, immediately airline lobbyists
are trying to roll it back, to weaken it, or just eliminate it.
And we saw it with the Airlines for America 93-page comments
that they filed a few weeks ago. And we're very, very worried
about the current DOT rolling back all of that hard work that
has taken, in some cases, not years, but decades.
Look, as soon as we got fee transparency become a
regulation, Airlines for America and other big carriers
immediately sued the DOT. Really think about that a moment.
They're suing the DOT, spending God knows how many millions of
dollars on that. To do what? To prevent all of us from knowing
the full price of a product before we swipe our credit card and
buy it. There's something wrong with the inherent system here.
Senator Klobuchar. Thank you very much.
Mr. McGee. Thank you.
Senator Hawley [presiding]. Senator Booker.
Senator Booker. Great. Three quick questions. Mr. Anderson,
just really quickly, we talked a little bit earlier--you did--
about the joint venture with Viva Aerobus, a Mexican-based low-
cost carrier. The proposed deal which was reviewed this past
April has faced opposition from labor unions, including the
Teamsters, which represent 1,400 Allegiant pilots through
Teamsters Local 2118. They are concerned, understandably, that
this partnership could lead to U.S. jobs being outsourced to
Mexican crews that are undercutting their wages.
And so, Mr. Anderson, is Allegiant still pursuing this
deal? And if so, can you provide us any assurances that
American jobs will be secured? And then do you really commit
here that American pilots will not face job losses if the deal
is successful?
Mr. Anderson. Thank you, Senator Booker, for the very
important question. We are continuing to pursue this deal. We
believe that through this joint venture, we will grow jobs,
including pilot jobs Allegiant for American pilots, and we will
commit to that within our application. I believe that is laid
out as well.
Senator Booker. I appreciate it. I am hoping we can have
more of a dialog on this as this goes forward. Is that Okay?
Mr. Anderson. We would welcome that.
Senator Booker. Thank you very much.
Mr. McGee, my penultimate question goes to you. Could you
just be a little bit more specific--because I actually think we
can get bipartisan support on this--about what the Trump
administration is doing when it comes to rolling back these
efforts of the previous administration and what the specific
impact it will have on Americans from all across our country?
Mr. McGee. Absolutely. Thank you, Senator. I'm happy to do
that. The bottom line is we don't yet know because the Trump
administration is asking for public comments, et cetera, as
part of the rulemaking process. But just the mere fact that
these would even be put on the chopping block is extremely
disturbing.
As you know, we had a very successful FAA reauthorization
last year. It was bipartisan support. It was both houses. It
was both parties. And we got protections that we had never seen
before, including for the first time automatic cash refunds.
And yet on the DOT list are things like fee transparency, on
compensation, on all kinds of things. And so we don't yet know,
but it is not a good sign that they're even asked to consider
this. It's part of their larger deregulatory effort.
And it's just heartbreaking to think what travel will be
like. We are talking about not being able to know the full
price of your fare. We are talking about not being compensated
when there are disruptive flight delays and lengthy flight
delays and flight cancellations. As I keep saying, the
contracts are written by and for the airlines. When do we get
our say? If we don't have Federal protection, and particularly
with Federal preemption that does not allow the States to get
involved, who's going to protect the consumers? If we have a
DOT Secretary who is indifferent to the concerns of passengers,
you're pretty much out of luck other than with Congress.
Ms. Pinkerton. Senator, if I can just interject, I want to
say for the record, Airlines for America supports every
provision in the FAA reauthorization bill, whether it was
family seating, whether it was reimbursement, automatic
refunds. We are in support of those provisions.
Mr. McGee. But Senator, at the same time, they are saying
that Secretary Buttigieg overstepped and expanded on some of
these ideas. As one example, the language in FAA
reauthorization was flight cancelations. He expanded it to
lengthy flight delays. So we are in the same spirit of what
Congress asked for.
Senator Booker. Okay. I just really want to end with you,
Professor. Things have gotten a little hairy between us. But I
want you to hit us with some bald-faced facts before we go.
Could you do me a favor? Like you have written so extensively.
This is such an area of research expertise for you. If you were
advising this Committee--and you have some great ideas, I just
don't know to the realm of what they are possible. But you can
see that this is a Committee that has a lot of bipartisan
feelings about our airlines. If you wanted to give us as a
takeaway some specific achievable advice perhaps in this
Congress of what this Committee can do together around these
issues of airline concentration, what would you say?
Professor Sitaraman. Well, thank you, Senator. Let me pick
a few very specific topics for you. One is, I think, gate
competition and hub concentration. I think we've heard a lot
about that today, and there's room for action on that. And I
think Senator Hawley and Senator Warren's bill on this would go
a great deal in that direction.
Second, on the passenger side, the one that you opened
with, which I think seat sizes are a thing that people find
extremely frustrating all around the country, and I think
setting a minimum floor could be a helpful step forward for
passengers.
And then third, on stability and resilience, I think
everyone is frustrated when you have an industry that does
extremely well in the good years and then comes running to
Congress for taxpayer bailouts and support when times get
tough. And so I think requiring airlines to think about
planning and being prepared for the crises that are likely to
come is something that would be a reasonable thing to do.
Senator Booker. And the one thing I often hear in my
conversations with some of the airlines is that on the global
scale, they are competing against State-sponsored airlines. Do
you have any thoughts about that competition that we have
globally now as the world becomes a smaller place?
Professor Sitaraman. Well, thanks, Senator. I think there's
two parts to it. You know, one is sometimes you hear from
people that the way to increase competition is to open up for
foreign carriers to operate within points in the United States,
and I think that's potentially a mistake because they are
State-sponsored and might be able to predatory-price airlines
here.
I think the second thing is we need to think about the
competition side as well. And, you know, a number of people
have touched on this as well, but I think there are real
questions around partnerships and loyalty programs there, too,
that could have an effect on competition.
Senator Booker. Yes, I really appreciate your work. I
appreciate all the witnesses. And to our stand-in Chairman, I
thank you very much for the latitude.
Senator Hawley. Absolutely. Thank you.
Let me just ask a question about the FAA reauthorization or
tied to it. And thank you for mentioning it a couple of times
now, Mr. McGee, and particularly the automatic refunds portion.
That was my amendment with Senator Warren.
Mr. McGee. We're well aware of it, Senator, and we
appreciate it.
Senator Hawley. I am glad that we were able to get it
passed. Something else that the FAA did on a bipartisan basis,
that reauthorization bill, was direct or authorize the
Department of Transportation to issue rules making sure that
families can sit with their children. And I can say, as a
father of three young children, you know, this is something
that is very important to families. Now, a lot of times
passengers feel like they should be paid to sit next to my
children, and maybe there is something to that.
But I just want to ask, Mr. Anderson, DOT maintains a list
of airlines that are currently complying with this and allow
families to sit with their children next to them. The children
are ticketed passengers, I just want to clarify, this isn't
free tickets. But they allow the children to sit next to the
parents at no additional seat charge. Now, according to the
dashboard the DOT has, your airline is not one of them,
meaning, there is Allegiant right there with a big red X,
meaning that you are charging families additional money over
and above the child's ticket in order to sit next to a parent.
I am hoping maybe you will tell me this is wrong. Is this
accurate?
Mr. Anderson. Senator Hawley, as a father of four young
children, it is a very important issue to me as well. We in
practice nearly always accommodate our families. Our gate
agents are trained and empowered to make sure it happens. And
over the past few years, I think there has only been a handful
of times in which we haven't been able to accommodate families
to sit together.
Senator Hawley. But am I hearing you to say that--that
doesn't sound like a yes. Am I hearing you to say that your
policy is not to provide seating for families, that they may
have to pay a fee depending on the circumstances? Is that
right? Is that why you have an X? Or is this wrong? I would
love to hear you say that this is just incorrect. Like all of
these other airlines that have green checks, we do not charge
additional fees for children who have already paid. They
already have a ticket. They are ticketed. But your airline
apparently is charging additional fees. I just want to know,
are you still doing that? It sounds to me like you are, but
please tell me that I am wrong.
[Poster is displayed.]
Mr. Anderson. You're not wrong. And the fact that we do
have a red X on the DOT tracker there, but----
Senator Hawley. Why do you do that? Can you change that? I
mean, can you tell us today that you are going to do what your
other peer airlines do and you are going to quit charging
families extra to sit next to their parents? I mean, we are
talking about kids who are 13 years of age and younger. This
isn't like the 18-year-old who probably doesn't want to sit
next to his parents anyway. I mean, these are a little--it is
like my 4-year-old little girl. I mean, I would kind of like to
have her next to me and not--I have already paid for her, and
not have to pay again. So I guess I don't understand. I know it
is money, but, you know, I mean, don't you think that keeping
families together is, you know, kind of important? The kids
have already paid.
Mr. Anderson. Very important. And----
Senator Hawley. Okay, good. Will you commit then to ending
this policy of charging additional fees?
Mr. Anderson. Senator, in practice, we accommodate our
families to sit together without paying additional fees. Our
gate agents are trained and empowered to make sure that
happens.
Senator Hawley. Well, you do it when you can, but your
policy is you can charge them if it comes down to it. So will
you just say here today, we are going to stop doing that. We
are not going to charge additional fees for families with young
kids. This is it. This could be a big moment. This could be
news.
Mr. Anderson. Yes, we will--there were some technology
issues that we're working through. We transformed our system,
but we will look into this and explore the red X.
Senator Hawley. Okay. Well, it would--maybe what we need to
do is we just need to make it law. I mean, maybe Congress is
just going to have to outright mandate it. You know, we hear
all the time, and you guys come up here and you say, don't
regulate us, don't tell us what to do. Well, I mean, there is a
reason that sometimes we have to, and this is the reason.
Let me ask you about something else. Can I just say for the
record, I think it is ridiculous that anybody is charging
families who already paid for tickets with small children,
charging them extra in order to have the kids next to them
making profit off of it. I mean, I just think that is kind of
predatory. I think it is really predatory, actually.
But let me ask you this. Dynamic seat pricing, which I
think both Frontier and Allegiant engage in, tell me if I am
wrong, but this is where you may charge me one fee and Katie
Britt a different fee and Cory Booker yet a third fee for the
same seat on the airline. It just depends. It is dynamic. There
is no set fee. You are shaking your head no, Mr. Biffle. So you
don't do dynamic seat pricing?
Mr. Biffle. So let's clarify dynamic seat pricing.
Senator Hawley. Price changes. It is not set.
Mr. Biffle. Yes, but it's set by route, not by individual
customer.
Senator Hawley. Okay. So you don't collect personal
information before people can see a price?
Mr. Biffle. No, we don't--we don't use personal
information----
Senator Hawley. You collect it, though.
Mr. Biffle. We collect it, but we don't charge you
differently.
Senator Hawley. Well, how do I know that? You collect ZIP
Code, you use browser cookies, location information, search
history. You collect date of birth. You collect gobs of stuff.
I got to enter all of that before I can see a seat price. And
my seat price may well be different than what Cory gets,
depending on what he enters.
Mr. Biffle. Well, I will tell you we've been changing that.
I have to have your date of birth to buy the ticket. That is
actually clunky. Back to technology things, we're changing that
so you won't have to do hardly anything. I want you to be able
to search and click quickly. So----
Senator Hawley. But why are you collecting all of this
personal information? What guarantee do I have that you are not
using this to set my price? I have no idea how you are setting
the price.
Mr. Biffle. I just guarantee you we're not.
Senator Hawley. Well----
Mr. Biffle. But----
Senator Hawley. Right, just like you guarantee me your
agents won't harass me, but you are paying them to do it. So, I
mean, don't you think that you owe us some evidence? I mean,
you are forcing your customers to enter all of this stuff
before they can even see a price.
Mr. Biffle. I will say it again. We are in the process of
eliminating that. It's actually----
Senator Hawley. Meaning I won't have to enter in this
personal information to see a price? You are just going to
use----
Mr. Biffle. Correct.
Senator Hawley [continuing]. A set price? Do you use AI in
your dynamic to see pricing at all?
Mr. Biffle. No.
Senator Hawley. Any advanced algorithms? Do you, Mr.
Anderson?
Mr. Anderson. No, not from----
Senator Hawley. Will you both agree not to do so going
forward?
Mr. Biffle. Okay. I don't know that I can agree to not use
AI. We use AI in all types of things. We will never use----
Senator Hawley. That is what worries me.
Mr. Biffle [continuing]. AI to use personal information. So
the insinuation that we're using your ZIP Code, your gender, or
any of those things too actually change the prices I find
appalling personally. I know there's another travel business--
not an airline--that I changed my credit card, and when they
figured out that I was using my business credit card, the price
changed. I was appalled. I was appalled.
Senator Hawley. That is dynamic pricing.
Mr. Biffle. Well, yes--well, that's--well, dynamic--when
you said dynamic, we--what we mean by that is actually a 1-hour
flight versus a 5-hour flight might have a different price,
just like the fare might be different.
Senator Hawley. No, it means that the consumer has no
idea--I have no idea what the price is going to be for a given
seat on a given flight until I give you all of my personal
information. It also means I have no idea if my price will be
the same as Katie's price or the same as Cory's price.
Mr. Biffle. As I said, we are eliminating all of that
information from being gathered.
Senator Hawley. Okay, good.
Mr. Biffle. We will still have to get your date of birth
before you buy because we're required for security reasons,
but, but we're going to stop collecting it up front.
Senator Hawley. Mr. Anderson, what about you? Will you
commit to not using personal information of any kind of set
prices?
Mr. Anderson. Yes, we have no intention of using personal
information to set prices.
Senator Hawley. Do you collect personal information before
you allow customers to see a price?
Mr. Anderson. We do before the seat selection, but that's
to accommodate SSRs and who is able to sit in exit row seats.
Senator Hawley. Mr. McGee, do you want to speak to this?
You have mentioned this earlier. I mean, the consumer here, we
are told, you know, trust us, trust us. But then the consumer
is also told, but give us all of your stuff. Give us all your
information. We will put it all in here. I can't go so much as
check to see what is available, the flight home to Springfield,
Missouri, unless I enter all of this junk. And I have no idea
what is being done with it.
Mr. McGee. Yes, Senator. Thank you very much. I was
recently on the privacy statement of one of the big three
carriers, and it was this long if you printed it out. And it
basically said that they were going to--that as soon as you go
on their site for the very first time, they're going to monitor
what you do, how long you're there, how long you stay on each
page, presumably also the sites that you were on before and
after it. Again, as I said, I think it would blow our minds to
know exactly what they're collecting. That's before we get into
the definition that most people would accept as personal
information. That's why I was warning that I think we need to
be much clearer about the language here.
I would argue that that is private information. If I'm a
shopper that goes on and is more impulsive and maybe books a
flight after 5 minutes of shopping, why should I be at a
disadvantage than someone that goes on 3 days in a row and
spends an hour? That is the definition of surveillance pricing,
personalized pricing, customized pricing, more synonyms than we
can even count on this, but it is unfair. It is un-American.
Senator Hawley. And it is going to get much worse with AI.
Ms. Pinkerton, let me just finish with you. I think it is
Delta said that they are using AI now to set prices, these
customized prices. Isn't this a terrible idea?
Ms. Pinkerton. Well, they've also made it----
Senator Hawley. I think--yes, there you go.
Ms. Pinkerton. Thank you. They've also made it very clear--
I know their general counsel and executive vice president wrote
a letter to Congress clarifying that they do not use personal
information.
Senator Hawley. How are we to know that? I mean, the whole
value of AI is to ingest massive amounts of personal
information in order to extract as much profit as you can from
every person. Why else would they use AI?
Ms. Pinkerton. Well, again, I think it's probably worth a
deeper conversation about our definitions of personal.
Senator Hawley. Maybe we should just ban it. How about
that? Should we just ban the use of AI in setting----
Ms. Pinkerton. AI has so many potential benefits in terms
of----
Senator Hawley. And abuses.
Ms. Pinkerton [continuing]. Providing--yes, absolutely. And
that's why we're committed to not using it----
Senator Hawley. Well, let's just make it easy. Would your
organization support a ban on using AI to set individualized
seat prices?
Ms. Pinkerton. No, no.
Senator Hawley. Why not?
Ms. Pinkerton. I think AI can be used in many, many
different ways to come up with----
Senator Hawley. Name me one that isn't about making a
profit for the airline at the expense of the customer. Why else
would you need AI to do it, to charge these differential
prices?
Ms. Pinkerton. It only an efficiency tool. I mean, we do--
--
Senator Hawley. Efficiency means money. It means profit for
the airline.
Ms. Pinkerton. Which, by the way, we're not very good at.
Senator Hawley. Oh, I disagree. I think your customers
would disagree.
Ms. Pinkerton. Yes, no, our profit margins are miserably
low. We never even are an average profit margin----
Senator Hawley. Okay.
Ms. Pinkerton [continuing]. So----
Senator Hawley. Okay. All right. I find that very hard to
believe----
Ms. Pinkerton. It's true.
Senator Hawley [continuing]. Or stomach. Well, I tell you
what is true is that the flying experience for most Americans
is terrible. It is atrocious. If you look at the surveys,
customer satisfaction surveys, airlines are always like at the
bottom. People hate it. They hate to fly. They have to fly, but
they hate to fly, and they hate it because of the policies we
have been talking about today. You charge them for your kids.
You make them enter all of this personal information. You pay
your own employees to harass them. And now you are going to use
AI to extract every last penny from them. It is terrible.
Ms. Pinkerton. I would love to show you the JD Power and
the American Consumer surveys----
Senator Hawley. Listen, I have seen the data and, you know,
not only that, I have talked to people all over my State who
fly, and I have flown all the time with my small children. It
is horrible. It is horrible. And it needs to be better. And I
think based on what we have heard today, Congress has got a lot
of work to do to make it better.
All right. With that, I don't need to read a script,
anything magic here to close this hearing? The record will be
open? Okay. Questions for the record are due a week from now. I
thank all of the witnesses for being here. All of you have
traveled. We are delighted that you have been here. Thanks to
our audience for being so polite.
And this hearing is adjourned.
[Whereupon, at 4:48 p.m., the hearing was adjourned.]
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