[Congressional Record Volume 143, Number 148 (Wednesday, October 29, 1997)]
[Senate]
[Pages S11345-S11346]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 1331. A bill to amend title 49, United States Code, to enhance 
domestic aviation competition by providing for the auction of slots at 
slot-controlled airports, and for other purposes; to the Committee on 
Commerce, Science, and Transportation.


            the aviation competition enhancement act of 1997

  Mr. McCAIN. Mr. President, I am pleased to introduce the Aviation 
Competition Enhancement Act of 1997. This bill seeks, in a modest and 
rational fashion, to deregulate further our domestic aviation system, 
and to introduce additional competition in the airline industry for the 
benefit of travelers and communities.
  This legislation is intended to reduce barriers to airline 
competition, including those imposed by the government. Anticompetitive 
Federal restrictions in particular--restrictions such as slot controls 
and the perimeter rule at National Airport--are barriers to competition 
in a deregulated environment.
  The Department of Transportation [DOT], in a report released on 
October 22, 1997, reiterated its 1990 study on domestic competition, 
which demonstrated relatively high fares at network hubs dominated by 
one major carrier. In an April 1996 study, the DOT estimated that 
almost 40 percent of domestic passengers traveled in markets with low-
fare competition, saving consumers an estimated $6.3 billion annually 
in airline fares. As the Department states in its most recent report, 
``[i]ndeed, we concluded that virtually all of the domestic traffic 
growth and declines in average fares in recent years could be 
attributed to this growing form of competition.''
  The General Accounting Office [GAO] reported in October 1996 that 
barriers to market entry persist in the airline industry, and that 
access to airports continue to be impeded by, first, Federal limits on 
takeoff and landing slots at the major airports in Chicago, New York, 
and Washington; second, long-term exclusive-use gate leases; and third, 
perimeter rules prohibiting flights at airports that exceed a certain 
distance. In addition, according to GAO, several factors have limited 
entry at airports serving small- and medium-sized communities in the 
East and upper Midwest, including the dominance of routes to and from 
those airports by one or two established airlines. The GAO concluded 
that operating barriers such as slot controls at nearby hub airports, 
and incumbent airlines marketing strategies' have fortified those 
dominant positions.
  The National Commission to Ensure a Strong Competitive Airline 
Industry in 1993 recommended that the artificial limits imposed by 
slots either be removed or raised to the highest level consistent with 
safety. The Department of Transportation subsequently conducted a 
study, in which it found that eliminating slots would not affect safety 
and would result in increased competition. This bill, however, does not 
suggest that we eliminate slots.

  Mr. President, I would like to outline what the Aviation Competition 
Enhancement Act of 1997 does:
  Slot auction: The legislation mandates a slot allocation among new 
entrant and limited incumbent air carriers--air carriers that hold no 
more than 12 slots. The Secretary of Transportation is directed to 
create new slots where possible, and allocate unused slots.
  If it is not possible to create slots because of capacity and noise 
limitations, which are not affected by this bill, the Secretary must 
withdraw a limited number of slots--up to 10 percent initially, 5 
percent every 2 years following--that were grandfathered free-of-charge 
to the major air carriers in 1985 and that remain with those 
grandfathered carriers. The DOT cannot withdraw slots that are used to 
provide air service to under served markets. The withdrawn slots then 
will be auctioned among only the new entrant and limited incumbent air 
carriers.
  The process for obtaining slots would be as follows. A new entrant or 
limited incumbent air carrier would apply to the DOT for slots, 
proposing the markets to be served and the times requested. The DOT 
must approve the application if it determines that the carrier can 
operate the proposed service for at least 180 days, and that the 
service will improve the competitive environment. The DOT can return 
the request to the applicant for further information.
  While service to any city is eligible under this process, the DOT 
must prioritize applications that propose service between a high-
density airport, a slot-controlled airport--National, Kennedy, 
LaGuardia, and O'Hare, and a relatively small city.
  All slot auction proceeds would be deposited in the aviation trust 
fund. The legislation directs the DOT to institute action to ensure 
maximum slot usage, to tighten up the 80 percent use-

[[Page S11346]]

or-lose provisions, and to study the effect of the high-density rule on 
airline competition, and the impact of changes to the rule on safety.
  Complaints concerning predatory behavior: The legislation establishes 
a 90-day deadline for the DOT to respond to complaints of predatory 
behavior on the part of major air carriers.
  Exemptions to perimeter rule at National Airport: The bill mandates 
that the Secretary grant exemptions from the perimeter rule to an air 
carrier proposing to serve Washington National from points beyond the 
perimeter, if the carrier's proposal would, first, provide service with 
network benefits, and second, increase competition in multiple markets. 
The proposal stipulates that the Secretary should not approve 
applications that propose to trade under served markets within the 
perimeter for long-haul markets that are well served from the 
Washington region.

  The legislation would not affect the cap on the number of hourly 
operations at Washington National. The number of flights at National 
would not increase. Commercial aircraft operations at National Airport 
are limited to 37 takeoffs and landings per hour. This requirement 
stands independent of the perimeter rule. In addition, strict noise 
restrictions currently in place at National Airport would not be 
affected, nor would Federal Aviation Administration requirements 
ensuring that all aircraft flying into National, regardless of the time 
of day, meet the most stringent noise standards by the year 2000.
  All exemption operations would be limited to stage 3 aircraft. The 
legislation would require the DOT to certify periodically that noise, 
air traffic congestion, airport-related vehicular congestion, safety 
standards, and adequate air service to communities within the perimeter 
have not been degraded as a result of this exemption authority.
  The fact is that changes in the perimeter rule to allow some measure 
of flights outside the distance limit may very well reduce noise at 
National, as carriers replace older, short-hop aircraft with newer, 
longer range aircraft that are quieter. The next generation of long-
haul Boeing 737 aircraft, for instance, will offer increased range 
along with significantly less noise. In addition, a number of flight 
deck improvements represent safety features not found in the older 
aircraft.
  As a means of derailing efforts to reform the perimeter rule, some 
have impugned my motives, suggesting that my secret purpose is to 
convenience my own travel between Washington and Arizona. I find this 
charge wearisome and offensive. Even so, to allay these concerns, I 
have pledged not to take a nonstop flight from Washington National to 
Arizona should such an opportunity ever result from this legislation.
  This bill would result in more competition, with more convenient 
options and competitive air fares for travelers. It would not result in 
either increased noise or diminished safety. I believe that a service 
diversity and safety will be enhanced, as they always are in a 
competitive regime. The incumbent carriers should not be afraid of 
competition, or fear that their passengers will be taken away. This 
legislation would result in more competition and economical flights, 
which will allow more people to fly.
  Most of my colleagues know that I would prefer to get rid of the 
perimeter rule, as well as slot restrictions, in a manner consistent 
with safety. My efforts to do so over the past decade, however, have 
encountered extreme resistance. As a result, I have scaled back my 
original proposals significantly in an effort to address the concerns 
of airlines and others who will not let legislation of that magnitude 
pass. In turn, I ask that the protectors of the status quo recognize my 
legitimate concerns about competition, and fair access for all 
travelers to airports that make up a national aviation system, paid for 
by all taxpayers. I must say that all I have heard thus far from my 
opponents is that there is no problem.

  I do not assert that this bill represents a magical, painless 
solution. I do assert emphatically, however, that it is modest in 
nature, and that it is open to debate as the Congress moves forward on 
this and similar proposals. In the House of Representatives, Aviation 
Subcommittee Chairman Jimmy Duncan intends to introduce an aviation 
competition bill. Representative Duncan and I have worked together on a 
number of provisions, and will continue to do so as we proceed. I 
commend him for his effort and foresight. I can say the same for Senate 
Aviation Subcommittee Chairman Gorton, who has demonstrated exceptional 
interest and leadership in this area.
  In addition, I understand that several of my Commerce Committee 
colleagues, including Senators Hollings and Ford, are working on their 
own competition proposals. I believe that all of this activity is a 
clear indication that there is a problem with respect to domestic 
aviation competition. I look forward to working with my colleagues in a 
bipartisan fashion on a solution.
  Mr. GORTON. Mr. President, I would urge my colleagues to give their 
full attention and consideration to the Aviation Competition 
Enhancement Act of 1997 that Senator McCain has just introduced. I 
would also recognize Senator McCain for his tireless efforts to address 
barriers to competition in the airline industry, and to provide better 
air service for consumers. Senator McCain has devoted much time to 
consideration of this issue.
  Compettion is a hallmark of our Nation, and the benefits of 
competition are clear. Studies show time and again that competition 
improves products and services, and reduces costs to consumers. When 
possible, the Congress should do whatever is reasonable to enhance 
competition.
  Airline competition has proven beneficial. Since the airline industry 
was deregulated, fares have fallen, and service options have increased 
on average across all communities. The major carriers deserve credit 
for responding well to competitive challenges. In addition, many of the 
benefits of deregulation can be attributed to the entry of so called 
low-fair airlines into the marketplace. The low-fare airlines have 
increased competition, and have enabled more people to fly than ever 
before. Air traffic has grown as a result, and all predictions are that 
it will continue to grow steadily over the next several years..
  Although competition exists, there are also barriers to airline 
competition. The bill that Senator McCain has introduced today would 
loosen some of the anticompetitive Federal restrictions on the Nation's 
aviation system. These restrictions, such as slot controls and the 
perimeter rule at National Airport, inhibit competition. As a result, 
the benefits of deregulation have been limited in certain communities.
  I understand that changing the status quo by easing existing barriers 
is difficult. Airline businesses and services have evolved under these 
barriers. Airlines, airports, communities, and consumers have all grown 
accustomed to these barriers. This should not prevent us, however, from 
examining the adverse impacts of these barriers and exploring 
reasonable measures to remove them.
  I would also note that Senator McCain's bill would require the 
Department of Transportation to respond to complaints of predatory 
behavior on the part of major airlines within 90 days. There are 
numerous industry practices that warrant close scrutiny. Take for 
example computer reservation systems. Airline travelers usually buy 
tickets through travel agents, who almost always use a Computer 
Reservation System to determine what airline fares are available, and 
to make bookings. Each of the Computer Reservation Systems operating in 
the United States is entirely or predominately owned by one or more 
airlines or airline affiliates. This certainly gives these airlines and 
affiliates the ability to prejudice the competitive position of other 
airlines if not checked. Any airline that believes it is being 
subjected to predatory behavior deserves a timely response from the 
Department of Transportation.
  Again, I would urge my colleagues to take time from their busy 
schedules to consider Senator McCain's bill, and to provide their 
thoughts and insights on this important matter.
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