[Congressional Record Volume 145, Number 20 (Thursday, February 4, 1999)]
[Senate]
[Pages S1277-S1281]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER (for himself, Mr. Dorgan, Mr. Wyden, Mr. 
        Harkin, and Mr. Bingaman):
  S. 379. A bill to amend title 49, United States Code, to authorize 
the Secretary of Transportation to implement a pilot program to improve 
access to the national transportation system for small communities, and 
for other purposes; to the Committee on Commerce, Science, and 
Transportation.


                the air service restoration act of 1999

 Mr. ROCKEFELLER. Mr. President, today I am pleased to 
introduce the Air Service Restoration Act of 1999, together with my 
colleagues Senators Dorgan, Wyden, Harkin and Bingaman.
  In the past several years there has been a growing debate in the 
Congress and across the nation about the state of our aviation 
industry. The primary concerns heard again and again are that a decline 
in air service to small and rural communities and increasing 
consolidation among airlines and in certain essential markets are 
hurting consumers and stifling economic development.
  I know these concerns well from the experience of my home State of 
West Virginia. By virtually any measure West Virginia is the State that 
has been hardest hit by air service declines in the twenty years since 
deregulation. With the notable exception of a few important upgrades 
and new opportunities in the last year, West Virginia's air service has 
been far inferior to that provided other communities--the planes are 
uncomfortable, the prices are high, and the schedules are thin and 
subject to frequent cancellations. As a result, at a time when the rest 
of the nation has experienced a 75 percent increase in air traffic, 
passenger enplanements statewide in West Virginia have declined by 
nearly 40 percent.
  The real tragedy of poor air service isn't passenger inconvenience or 
frustration, however, it's the negative impact on economic development. 
In today's global marketplace air service has become the single most 
important mode of transportation. When it comes to economic growth, 
there is no substitute for good air service, and the lack of quality, 
affordable service can and does hold us back, stunting economic growth 
in West Virginia just as it does in small and rural communities across 
the country. We must act now to stem this tide--to restore and promote 
air service to under-served areas--or we will never be able to close 
the gap in a meaningful and sustained way.
  This legislation is designed not only to build on the successes of 
airline deregulation but also to take responsibility for its failures. 
It contains four major provisions:
  First, the centerpiece of the bill is a five-year $100 million pilot 
program for up to 40 small and under-served communities, with grants of 
up to $500,000 to each community for local initiatives to attract and 
promote service.
  Second, the Department of Transportation would have the authority to 
facilitate links between pilot communities and major airports by 
requiring joint fares and interline agreements between dominant 
airlines at hub airports and new service providers at under-served 
airports.

  Third, to address a key infrastructure concern of small and rural 
airports, the bill establishes a pilot program allowing communities 
facing the loss of an air traffic control tower to instead share the 
cost of funding the tower, on a contract basis, in proportion to the 
cost-benefit ratio of the tower.
  Fourth, the bill calls on the Department of Transportation to review 
airline industry marketing practices--practices which many believe are 
exacerbating the decline in air service to small communities--and, if 
necessary, promulgate regulations to curb abuses.
  The legislation we introduce today should begin to afford small and 
rural community air service the priority they deserve in our national 
transportation policy. It is similar to a bill I and my colleagues 
introduced last year, many provisions of which were adopted by the full 
Senate in the failed FAA and AIP reauthorization bill of 1998. 
Variations on some of these provisions have also been included in the 
1999 reauthorization bill introduced last month by Senators McCain, 
Hollings, Gorton and myself. I am hopeful that we will successfully 
enact this legislation, to protect and restore small community air 
service, this year.
  Admittedly, airline deregulation has been a real success story in 
much of the nation, with lower fares, better service, and more choices 
for many passengers, as well as tremendous financial success and 
stability for commercial airlines. But as I have said in the past, 
airline deregulation has handed out the benefits of air travel 
unevenly, and we face today an ever-widening gap between the air 
transportation ``haves'' and ``have-nots''. We in the Congress have a 
responsibility to foster and maintain a truly national air 
transportation system, and we fail our small and rural communities when 
we leave them with the choice between high-cost, poor-quality service 
or no service at all.
  This legislation and this year offer a real opportunity to re-double 
our efforts to connect small and rural communities to our air 
transportation system in a meaningful way. I commend the efforts of 
Senators Dorgan, Wyden, Harkin and Bingaman to solve this daunting 
national problem, and I hope our colleagues will join us in the 
endeavor.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 379

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Air Service Restoration 
     Act''.

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) a national transportation system providing safe, high 
     quality service to all areas of the United States is 
     essential to interstate commerce and the economic well-being 
     of cities and towns throughout the United States;
       (2) taxpayers throughout the United States have supported 
     and helped to fund the United States aviation infrastructure 
     and have a right to expect that aviation services will be 
     provided in an equitable and fair manner to every region of 
     the country;
       (3) some communities have not benefited from airline 
     deregulation and access to essential airports and air 
     services has been limited;
       (4) air service to a number of small communities has 
     suffered since deregulation;
       (5) studies by the Department of Transportation have 
     documented that, since the airline industry was deregulated 
     in 1978--
       (A) 34 small communities have lost service and many small 
     communities have had jet aircraft service replaced by 
     turboprop aircraft service;
       (B) out of a total of 320 small communities, the number of 
     small communities being served by major air carriers declined 
     from 213 in 1978 to 33 in 1995;
       (C) the number of small communities receiving service to 
     only one major hub airport increased from 79 in 1978 to 134 
     in 1995; and
       (D) the number of small communities receiving multiple-
     carrier service decreased from 136 in 1978 to 122 in 1995; 
     and
       (6) improving air service to small- and medium-sized 
     communities that have not benefited from fare reductions and 
     improved

[[Page S1278]]

     service since deregulation will likely entail a range of 
     Federal, State, regional, local, and private sector 
     initiatives.

     SEC. 3. PURPOSE.

       The purpose of this Act is to facilitate, through a pilot 
     program, incentives and projects that will help communities 
     to improve their access to the essential airport facilities 
     of the national air transportation system through public-
     private partnerships and to identify and establish ways to 
     overcome the unique policy, economic, geographic, and 
     marketplace factors that may inhibit the availability of 
     quality, affordable air service to small communities.

     SEC. 4. ESTABLISHMENT OF SMALL COMMUNITY AVIATION DEVELOPMENT 
                   PROGRAM

       Section 102 is amended by adding at the end thereof the 
     following:
       ``(g) Small Community Air Service Development Program.--
       ``(1) Establishment.--The Secretary shall establish a 5-
     year pilot aviation development program to be administered by 
     a program director designated by the Secretary.
       ``(2) Functions.--The program director shall--
       ``(A) function as a facilitator between small communities 
     and air carriers;
       ``(B) carry out section 41743 of this title;
       ``(C) carry out the airline service restoration program 
     under sections 41744, 41745, and 41746 of this title;
       ``(D) ensure that the Bureau of Transportation Statistics 
     collects data on passenger information to assess the service 
     needs of small communities;
       ``(E) work with and coordinate efforts with other Federal, 
     State, and local agencies to increase the viability of 
     service to small communities and the creation of aviation 
     development zones; and
       ``(F) provide policy recommendations to the Secretary and 
     the Congress that will ensure that small communities have 
     access to quality, affordable air transportation services.
       ``(3) Reports.--The program director shall provide an 
     annual report to the Secretary and the Congress beginning in 
     2000 that--
       ``(A) analyzes the availability of air transportation 
     services in small communities, including, but not limited to, 
     an assessment of the air fares charged for air transportation 
     services in small communities compared to air fares charged 
     for air transportation services in larger metropolitan areas 
     and an assessment of the levels of service, measured by types 
     of aircraft used, the availability of seats, and scheduling 
     of flights, provided to small communities.
       ``(B) identifies the policy, economic, geographic and 
     marketplace factors that inhibit the availability of quality, 
     affordable air transportation services to small communities; 
     and
       ``(C) provides policy recommendations to address the 
     policy, economic, geographic and marketplace factors 
     inhibiting the availability of quality, affordable air 
     transportation services to small communities.''.

     SEC. 5. COMMUNITY-CARRIER AIR SERVICE PROGRAM.

       (a) In General.--Subchapter II of chapter 417 is amended by 
     adding at the end thereof the following:

     ``Sec. 41743. Air service program for small communities

       ``(a) Communities Program.--Under advisory guidelines 
     prescribed by the Secretary of Transportation, a small 
     community or a consortia of small communities or a State may 
     develop an assessment of its air service requirements, in 
     such form as the program director designated by the Secretary 
     under section 102(g) may require, and submit the assessment 
     and service proposal to the program director.
       ``(b) Selection of Participants.--In selecting community 
     programs for participation in the communities program under 
     subsection (a), the program director shall apply criteria, 
     including geographical diversity and the presentation of 
     unique circumstances, that will demonstrate the feasibility 
     of the program. For purposes of this subsection, the 
     application of geographical diversity criteria means criteria 
     that--
       ``(1) will promote the development of a national air 
     transportation system; and
       ``(2) will involve the participation of communities in all 
     regions of the country.
       ``(c) Carriers Program.--The program director shall invite 
     part 121 air carriers and regional/commuter carriers (as such 
     terms are defined in section 41715(d) of this title) to offer 
     service proposals in response to, or in conjunction with, 
     community aircraft service assessments submitted to the 
     office under subsection (a). A service proposal under this 
     paragraph shall include--
       ``(1) an assessment of potential daily passenger traffic, 
     revenues, and costs necessary for the carrier to offer the 
     service;
       ``(2) a forecast of the minimum percentage of that traffic 
     the carrier would require the community to garner in order 
     for the carrier to start up and maintain the service; and
       ``(3) the costs and benefits of providing jet service by 
     regional or other jet aircraft.
       ``(d) Program Support Function.--The program director shall 
     work with small communities and air carriers, taking into 
     account their proposals and needs, to facilitate the 
     initiation of service. The program director--
       ``(1) may work with communities to develop innovative means 
     and incentives for the initiation of service;
       ``(2) may obligate funds authorized under section 6 of the 
     Air Service Restoration Act to carry out this section;
       ``(3) shall continue to work with both the carriers and the 
     communities to develop a combination of community incentives 
     and carrier service levels that--
       ``(A) are acceptable to communities and carriers; and
       ``(B) do not conflict with other Federal or State programs 
     to facilitate air transportation to the communities;
       ``(4) designate an airport in the program as an Air Service 
     Development Zone and work with the community on means to 
     attract business to the area surrounding the airport, to 
     develop land use options for the area, and provide data, 
     working with the Department of Commerce and other agencies;
       ``(5) take such other action under this chapter as may be 
     appropriate.
       ``(e) Limitations.--
       ``(1) Community support.--The program director may not 
     provide financial assistance under subsection (c)(2) to any 
     community unless the program director determines that--
       ``(A) a public-private partnership exists at the community 
     level to carry out the community's proposal;
       ``(B) the community will make a substantial financial 
     contribution that is appropriate for that community's 
     resources, but of not less than 25 percent of the cost of the 
     project in any event;
       ``(C) the community has established an open process for 
     soliciting air service proposals; and
       ``(D) the community will accord similar benefits to air 
     carriers that are similarly situated.
       ``(2) Amount.--The program director may not obligate more 
     than $100,000,000 of the amounts authorized under section 6 
     of the Air Service Restoration Act over the 5 years of the 
     program.
       ``(3) Number of participants.--The program established 
     under subsection (a) shall not involve more than 40 
     communities or consortia of communities.
       ``(f) Report.--The program director shall report through 
     the Secretary to the Congress annually on the progress made 
     under this section during the preceding year in expanding 
     commercial aviation service to smaller communities.

     ``Sec. 41744. Pilot program project authority

       ``(a) In General.--The program director designated by the 
     Secretary of Transportation under section 102(g)(1) shall 
     establish a 5-year pilot program--
       ``(1) to assist communities and States with inadequate 
     access to the national transportation system to improve their 
     access to that system; and
       ``(2) to facilitate better air service link-ups to support 
     the improved access.
       ``(b) Project Authority.--Under the pilot program 
     established pursuant to subsection (a), the program director 
     may--
       ``(1) out of amounts authorized under section 6 of the Air 
     Service Restoration Act, provide financial assistance by way 
     of grants to small communities or consortia of small 
     communities under section 41743 of up to $500,000 per year; 
     and
       ``(2) take such other action as may be appropriate.
       ``(c) Other Action.--Under the pilot program established 
     pursuant to subsection (a), the program director may 
     facilitate service by--
       ``(1) working with airports and air carriers to ensure that 
     appropriate facilities are made available at essential 
     airports;
       ``(2) collecting data on air carrier service to small 
     communities; and
       ``(3) providing policy recommendations to the Secretary to 
     stimulate air service and competition to small communities.
       ``(d) Additional Action.--Unsder the pilot program 
     established pursuant to subsection (a), the Secretary shall 
     work with air carriers providing service to participating 
     communities and major air carriers serving large hub airports 
     (as defined in section 41731(a)(3)) to facilitate joint fare 
     arrangements consistent with normal industry practice.

     ``Sec. 41745. Assistance to communities for service

       ``(a) In General.--Financial assistance provided under 
     section 41743 during any fiscal year as part of the pilot 
     program established under section 41744(a) shall be implement 
     for not more than--
       ``(1) 4 communities within any State at any given time; and
       ``(2) 40 communities in the entire program at any time.

     For purposes of this subsection, a consortium of communities 
     shall be treated as a single community.
       ``(b) Eligibility.--In order to participate in a pilot 
     project under this subchapter, a State, community, or group 
     of communities shall apply to the Secretary in such form and 
     at such time, and shall supply such information, as the 
     Secretary may require, and shall demonstrate to the 
     satisfaction of the Secretary that--
       ``(1) the applicant has an identifiable need for access, or 
     improved access, to the national air transportation system 
     that would benefit the public;
       ``(2) the pilot project will provide material benefits to a 
     broad section of the travelling public, businesses, 
     educational institutions, and other enterprises whose access 
     to the national air transportation system is limited;
       ``(3) the pilot project will not impede competition; and
       (4) the applicant has established, or will establish, 
     public-private partnerships in connection with the pilot 
     project to facilitate service to the public.

[[Page S1279]]

       ``(c) Coordination With Other Provisions of Subchapter.--
     The Secretary shall carry out the 5-year pilot program 
     authorized by this subchapter in such a manner as to 
     complement action taken under the other provisions of this 
     subchapter. To the extent the Secretary determines to be 
     appropriate, the Secretary may adopt criteria for 
     implementation of the 5-year pilot program that are the same 
     as, or similar to, the criteria developed under the preceding 
     sections of this subchapter for determining which airports 
     are eligible under those sections. The Secretary shall also, 
     to the extent possible, provide incentives where no direct, 
     viable, and feasible alternative service exists, taking into 
     account geographical diversity and appropriate market 
     definitions.
       ``(d) Maximization of Participation.--The Secretary shall 
     structure the program established pursuant to section 
     41744(a) in a way designed to--
       ``(1) permit the participation of the maximum feasible 
     number of communities and States over a 5-year period by 
     limiting the number of years of participation or otherwise; 
     and
       ``(2) obtain the greatest possible leverage from the 
     financial resources available to the Secretary and the 
     applicant by--
       ``(A) progressively decreasing, on a project-by-project 
     basis, any Federal financial incentives provided under this 
     chapter over the 5-year period; and
       ``(B) terminating as early as feasible Federal financial 
     incentives for any project determined by the Secretary after 
     its implementation to be--
       ``(i) viable without further support under this subchapter; 
     or
       ``(ii) failing to meet the purposes of this chapter or 
     criteria established by the Secretary under the pilot 
     program.
       ``(e) Success Bonus.--If Federal financial incentives to a 
     community are terminated under subsection (d)(2)(B) because 
     of the success of the program in that community, then that 
     community may receive a one-time incentive grant to ensure 
     the continued success of that program.
       ``(f) Program To Terminate in 5 Years.--No new financial 
     assistance may be provided under this subchapter for any 
     fiscal year beginning more than 5 years after the date of 
     enactment of the Air Service Restoration Act.

     ``Sec. 41746. Additional authority

       ``In carrying out this chapter, the Secretary--
       ``(1) may provide assistance to States and communities in 
     the design and application phase of any project under this 
     chapter, and oversee the implementation of any such project;
       ``(2) may assist States and communities in putting together 
     projects under this chapter to utilize private sector 
     resources, other Federal resources, or a combination of 
     public and private resources;
       ``(3) may accord priority to service by jet aircraft;
       ``(4) take such action as may be necessary to ensure that 
     financial resources, facilities, and administrative 
     arrangements made under this chapter are used to carry out 
     the purposes of the Air Service Restoration Act; and
       ``(5) shall work with the Federal Aviation Administration 
     on airport and air traffic control needs of communities in 
     the program.

     ``Sec. 41747. Air traffic control services pilot program

       ``(a) In General.--To further facilitate the use of, and 
     improve the safety at, small airports, the Administrator of 
     the Federal Aviation Administration shall establish a pilot 
     program to contract for Level I air traffic control services 
     at 20 facilities not eligible for participation in the 
     Federal Contract Tower Program.
       ``(b) Program Components.--In carrying out the pilot 
     program established under subsection (a), the Administrator 
     may--
       ``(1) utilize current, actual, site-specific data, forecast 
     estimates, or airport system plan data provided by a facility 
     owner or operator;
       ``(2) take into consideration unique aviation safety, 
     weather, strategic national interest, disaster relief, 
     medical and other emergency management relief services, 
     status of regional airline service, and related factors at 
     the facility;
       ``(3) approve for participation any facility willing to 
     fund a pro rata share of the operating costs used by the 
     Federal Aviation Administration to calculate, and, as 
     necessary, a 1:1 benefit-to-cost ration, as required for 
     eligibility under the Federal Contract Tower Program; and
       ``(4) approve for participation no more than 3 facilities 
     willing to fund a pro rata share of construction costs for an 
     air traffic control tower so as to achieve, at a minimum, a 
     1:1 benefit-to-cost ratio, as required for eligibility under 
     the Federal Contract Tower Program, and for each of such 
     facilities the Federal share of construction costs does not 
     exceed $1,000,000.
       ``(c) Report.--One year before the pilot program 
     established under subsection (a) terminates, the 
     Administrator shall report to the Congress on the 
     effectiveness of the program, with particular emphasis on the 
     safety and economic benefits provided to program participants 
     and the national air transportation system.''.
       (b) Conforming Amendment.--The chapter analysis for 
     subchapter II of chapter 417 is amended by inserting after 
     the item relating to section 41742 the following:

``41743. Air service program for small communities.
``41744. Pilot program project authority.
``41745. Assistance to communities for service.
``41746. Additional authority.
``41747. Air traffic control services pilot program.''.

       (c) Waiver of Local Contribution.--Section 41736(b) is 
     amended by inserting after paragraph (4) the following:

     ``Paragraph (4) does not apply to any community approved for 
     service under this section during the period beginning 
     October 1, 1991, and ending December 31, 1997.''.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Transportation such 
     sums as may be necessary to carry out section 41747 of title 
     49, United States Code.

     SEC. 6. AUTHORIZATION OF APPROPRIATIONS.

       To carry out sections 41743 through 41746 of title 49, 
     United States Code, for the 4 fiscal-year period 
     beginning with fiscal year 2000 there are authorized to be 
     appropriated to the Secretary of Transportation not more 
     than $100,000,000.

     SEC. 7. MARKETING PRACTICES.

       Section 41712 is amended by--
       (1) inserting ``(a) In General.--'' before ``On''; and
       (2) adding at the end thereof the following:
       ``(b) Marketing Practices That Adversely Affect Service to 
     Small or Medium Communities.--Within 180 days after the date 
     of enactment of the Air Service Restoration Act, the 
     Secretary shall review the marketing practices of air 
     carriers that may inhibit the availability of quality, 
     affordable air transportation services to small and medium-
     sized communities, including--
       ``(1) marketing arrangements between airlines and travel 
     agents;
       ``(2) code-sharing partnerships;
       ``(3) computer reservation system displays;
       ``(4) gate arrangements at airports;
       ``(5) exclusive dealing arrangements; and
       ``(6) any other marketing practice that may have the same 
     effect.
       ``(c) Regulations.--If the Secretary finds, after 
     conducting the review required by subsection (b), that 
     marketing practices inhibit the availability of such service 
     to such communities, then, after public notice and an 
     opportunity for comment, the Secretary shall promulgate 
     regulations that address the problem.''.

     SEC. 8. NONDISCRIMINATORY INTERLINE INTERCONNECTION 
                   REQUIREMENTS.

       (a) In General.--Subchapter I of chapter 417 is amended by 
     adding at the end thereof the following:

     ``Sec. 41717. Interline agreements for domestic 
       transportation

       ``(a) Nondiscriminatory Requirements.--If a major air 
     carrier that provides air service to an essential airport 
     facility has any agreement involving ticketing, baggage and 
     ground handling, and terminal and gate access with another 
     carrier, it shall provide the same services to any requesting 
     air carrier that offers service to a community selected for 
     participation in the program under section 41743 under 
     similar terms and conditions and on a nondiscriminatory basis 
     within 30 days after receiving the request, as long as the 
     requesting air carrier meets such safety, service, financial, 
     and maintenance requirements, if any, as the Secretary may by 
     regulation establish consistent with public convenience and 
     necessity. The Secretary must review any proposed agreement 
     to determine if the requesting carrier meets operational 
     requirements consistent with the rules, procedures, and 
     policies of the major carrier. This agreement may be 
     terminated by either party in the event of failure to meet 
     the standards and conditions outlined in the agreement.
       ``(b) Definitions.--In this section the term `essential 
     airport facility' means a large hub airport (as defined in 
     section 41731(a)(3)) in the contiguous 48 States in which one 
     carrier has more than 50 percent of such airport's total 
     annual enplanements.''.
       (b) Clerical amendment.--The chapter analysis for 
     subchapter I of chapter 417 is amended by adding at the end 
     thereof the following:

``41717. Interline agreements for domestic transportation.''.

 Mr. DORGAN. Mr. President, I am pleased to introduce 
legislation today, along with other colleagues, that is designed to 
inject more airline competition and improve air service to small 
communities. Since the deregulation of the airline industry two decades 
ago, hundreds of small communities have experienced service degradation 
and many have lost service altogether. Vast geographic regions of our 
country have suffered unacceptable geographic isolation as the airlines 
have withdrawn service in smaller communities. This trend needs the 
serious attention of the Congress and the Department of Transportation.
  Included in this legislation are several provisions designed to 
promote airline competition and develop air service to the many rural 
areas of the country that have suffered the consequences of laissez-
faire deregulation. The consequence can be summed up in one phrase: 
``unregulated monopolies.''

[[Page S1280]]

  Unregulated monopolies result in a number of effects: (1) higher 
prices and fewer choices for consumers and (2) the elimination of 
competition and the establishment of entry barriers that make 
competition a nearly impossible task.
  While deregulation has been a wonderful success for the people who 
travel between the major metropolitan areas of the country, it has been 
an unmitigated disaster for most rural areas and smaller communities. 
Transportation Department studies have documented that 167 communities 
has lost air service in the past two decades and hundreds have suffered 
service degradation manifested by loss of jet service or loss of access 
to a major hub airport.
  In a report by the General Accounting Office issued in October, 1997 
entitled, ``Airline Deregulation: Barriers to Entry Continue to Limit 
Competition in Several Key Domestic Markets'' [GAO/RCED-97-4], 
operating limitations and marketing practices of large, dominate 
carriers restrict entry and competition to an extent not anticipated by 
Congress when it deregulated the airline industry. The GAO identified a 
number of entry barriers and anti-competitive practices which are 
stifling competition and contributing to higher fares. The GAO issued a 
similar report in 1990 and the 1996 report said that not only has the 
situation not improved for new entrants, but things have gotten worse.
  These mega carriers have created theifdoms, securing dominate market 
shares at regional hubs. Since deregulation, all major airlines have 
created hub-and-spoke systems where they funnel arrivals and departures 
though hub airports where they dominate traffic. Today, all but 3 hubs 
are dominated by a single airline where the carrier has between 60 and 
90 percent of all the arrivals, departures, and passengers at the hub.
  The fact is that deregulation has lead to greater concentration and 
stifling competition. The legislative history of the Civil Aeronautics 
Act of 1938 shows that Congress was as deeply concerned about 
destructive competition as it was with the monopolization of air 
transportation services. Thus, the CAA sought to ensure that a 
competitive economic environment existed. As we can see, deregulation 
is realizing the fears anticipated by the Congress in 1938. Competition 
has not become the general rule. Rather, competition is the exception 
in an unregulated market controlled largely by regional monopolies.
  Deregulation has also resulted in disproportionate air fares. It has 
been demonstrated that hub concentration has translated into higher 
fares and rural communities that are dependent upon concentrated hubs 
have seen higher fares.
  Studies from DOT and the GAO have demonstrated that in the 15 out of 
18 hubs in which a single carrier controls more than 50% of the 
traffic, passengers are paying more than the industry norm. The GAO 
studied 1988 fares at 15 concentrated airports and compared those with 
fares at 38 competitive hub airports. The GAO found that fares at the 
concentrated hubs were 27% higher.
  The difference between regulation and deregulation is not a change 
from monopoly control to free market competition. Rather, the change is 
from having regulated monopolies serving 93% of the market to 
deregulated monopolies serving 85% of the market, according to Dempsey. 
Today, nearly two-thirds of our nation's city-pairs are unregulated 
monopolies where a monopoly carrier can charge whatever they wish in 2 
our of 3 city-pairs in the domestic market.
  A January 1991 GAO Report on Fares and Concentration at Small-City 
Airports found that passengers flying from small-city airports on 
average paid 34 percent more when they flew to a major airport 
dominated by one or two airlines than when they flew to a major airport 
that was not concentrated. The report also found that when both the 
small airport and the major hub were concentrated, fares were 42 
percent higher than if there was competition at both ends.
  A July 1993 GAO Report on Airline Competition concluded that airline 
passengers generally pay higher fares at 14 concentrated airports than 
at airports with more competition. The report found that fares at 
concentrated airports were about 22 percent higher than fares at 35 
less concentrated airports. The same report found that the number of 
destinations served directly by only one airline rose 56 percent to 64 
percent from 1985 to 1992, while the number of destinations served by 3 
or more airlines fell from 19% to 11% during that same period. This 
report confirmed similar conclusion reached in previous GAO studies 
conducted in 1989 and 1990.
  The fact is that deregulation, while paving the road to concentration 
and consolidation, has allowed regional monopolies to control prices in 
non-competitive markets. While the entrance of low cost carriers has 
introduced competition in dense markets, the main difference between 
today and pre-deregulation is that the monopolies are unregulated.

  Concentration, not competition, is the current trend in the airline 
industry. In 1938, when the Federal Government began to regulate air 
transportation services, there were 16 carriers who accounted for all 
the total traffic in the U.S. domestic market. By 1978 (the year 
Congress passed deregulation legislation) the same 16 carriers (reduced 
to 11 through mergers) still accounted for 94% of the total traffic.
  Today, those same 11 carriers (now reduced to 7 through mergers and 
bankruptcies) account for over 80% of the total traffic [measured in 
terms of revenue passenger miles]. When these 7 carriers (American; 
Continental; Delta; Northwest; United; and US Air) are combined with 
their code-share partner, they account for more than 95% of the total 
air traffics in the domestic U.S.
  One expert estimated in 1992 that since deregulation, over 120 new 
airlines appeared. However, more than 200 have gone bankrupt or been 
acquired in mergers.
  Between 1970 and 1988, there were 51 airline mergers and 
acquisitions--20 of those were approved by the Department of 
Transportation after 1985, when it assumed all jurisdiction over merger 
and acquisition requests. In fact, DOT approved every airline merger 
submitted to it after it assumed jurisdiction over mergers from the 
Civil Aeronautics Board in 1984. Fifteen independent airlines operating 
at the beginning of 1986 had been merged into six mega carriers by the 
end of 1987. And, these six carriers increased their market share from 
71.3% in 1978 to 80.5% in 1990.
  At a hearing last year in the Senate Commerce Committee, Alfred Kahn, 
the father of airline deregulation, testified and offered some 
interesting reflections on the results of airline deregulation. I 
recounted for him the unprecedented concentration in the market that 
was fostered by the deregulation he helped create and asked him if he 
foresaw this and if the competition he expected to merge has been 
realized. He responded with great disappointment saying that the 
industry concentration has perverted the purpose of deregulation and he 
pinned much of the blame for this result on the mergers. He said: 
``While I do not want to mention anyone by name, but one of the 
problems is that there was one Secretary of Transportation who never 
met a merger she did not like.''
  These mega carriers have created competition free zones, securing 
dominate market shares at regional hubs. Since deregulation, all major 
airlines have created hub-and-spoke systems where they funnel arrivals 
and departures though hub airports where they dominate traffic. Today, 
all but 3 hubs are dominated by a single airline where the carrier has 
between 60 and 90 percent of all the arrivals, departures, and 
passengers at the hub.
  The non-aggression pacts between the major airline carriers are also 
being manifested in code-share partnerships--which are virtual 
mergers--where they pledge not to compete but to combine their route 
systems to further solidify their control over their regional 
monopolies.
  Northwest has announced a deal with Continental; while United and 
Delta are teaming up; and American and US Air are establishing a 
partnership. While code-share partnerships are not mergers, but the 
impact on market concentration may be the same.
  The proposed partnerships between the major carriers (and their code-
share partners) will have the following shares of the U.S. domestic 
market:

[[Page S1281]]

  Delta/United: 35 percent; American/US Air: 26 percent; and Northwest/
Continental: 21 percent for a total of 82 percent.
  In contrast, the rest of the carriers share less than 20% combined--
the largest share of which is Southwest Airlines at 6.4%.
  This legislation would establish the Small Community Air Service 
Development Program which could go a long way to address the small 
community air service problems. Earlier this year, Senator McCain and 
others introduced S. 82, the ``Air Transportation Improvement Act,'' 
which contains provisions establishing this program. However, the 
authorization level proposed in that legislation does not provide 
adequate enough resources for this demonstration program to make much 
of a difference. Thus, this bill would establish a 5-year pilot 
program, authorized at $20 million per year--which is half the amount 
currently provided annually to the Essential Air Service Program. In 
contrast, S. 82 provides only $30 million total over a 4-year period. 
At that level, very few communities will be able to participate and 
their air service deficiencies will unfortunately continue.
  In addition, the bill requires the Department of Transportation to 
review the marketing practices of the major airlines and to take action 
to rectify problems that impede air service to small and medium sized 
communities. Numerous GAO reports have highlighted the anti-competitive 
nature of some airline policies toward travel agents; bias in computer 
reservation systems; and certain gate arrangements at some airports. 
These barriers to entry need to be addressed and this legislation would 
address those problems.
  This measure also includes a provision to facilitate air service to 
under-served communities and encourage airline competition through non-
discriminatory interconnection requirements between air carriers. This 
provision simply imposes a nondiscrimination requirement on air 
carriers with market dominance at large hub airports--which are the 
bottleneck access points to the national air transportation system--
with respect to interline agreements in order to allow competitors to 
interconnect into the large hub airports. Interline arrangements will 
allow passengers to move more efficiently between carriers when 
transferring between while maintaining the independent identities of 
competing carriers.

  Barriers to competition in the airline industry have grown more 
insurmountable under the hub and spoke system where the major carriers 
dominate the large hubs, granting them regional monopolies. These 
dominate carriers are selective with their cooperation with other 
carriers; limiting their interline and joint fare agreements only to 
carriers that will not directly compete with them. In a circumstance 
where a major airline dominates access to the large hub airports, 
carriers not afforded the cooperation of the major airlines face an 
insurmountable barrier to entry.
  The principle of this amendment is simple: if an air carrier has 
market dominance at a large hub airport, then that carrier cannot 
discriminate amongst carriers with whom it provides cooperation to 
allow passengers to transfer between each carrier's network at the 
dominate hub. This amendment would not impose any code-sharing or other 
business agreements on marketing or promotion. Rather, it requires 
cooperation and prevents anti-competitive discrimination with respect 
to interline agreements between carriers.
  The principle underlying this provision is similar to the fundamental 
principle driving local competition in telecommunications markets. When 
Congress de-regulated the telecommunications industry three years ago, 
the fundamental element to promote competition in that legislation was 
the requirement that the incumbent carriers would be required, by law, 
to allow their competitors to interconnect into their network. In a 
situation where the incumbent dominates or controls the local 
bottleneck (in phone service it is the local loop and in aviation it is 
the large hub airports through which most all air traffic flows) the 
only way to permit competition is to require interconnection. If the 
incumbent carriers are permitted to exclude passengers from competing 
airlines to flow between their system and that of their competitors, 
the major carriers that dominate the hubs will ensure that there is no 
possibility of successful competition.
  The interline provision is similar to the interconnection 
requirements imposed upon local phone monopolies. In order to develop 
competition in the local market, we had to impose, by law, the 
requirement that the monopoly must allow its competitors to 
interconnect into their networks. The interline provision is the 
aviation equivalent of that requirement (except that under this 
provision, the only requirement is that dominant carriers who control 
access to the air service bottlenecks cannot discriminate amongst the 
carriers it provides cooperation to permit passengers to transfer 
between networks). In light of what has been required of other 
industries under the goal of promoting competition (e.g., 
telecommunications), a non-discriminatory interline requirement makes 
sense if one wants to see a competitive industry.

  This provision is not about re-regulation--it is about fulfilling the 
goal of deregulation by encouraging competition and allowing 
competition to be the regulator. Fostering competition is a mandate of 
the Airline Deregulation Act. This amendment is consistent with the 
mandate under current law that the Secretary foster competition. Under 
the Airline Deregulation Act, Section 40101 of Title 49, U.S.C., the 
Department of Transportation is directed to: avoid unreasonable 
industry concentration [Sec. 40101(a)(10)]; encourage, develop, and 
maintain an air transportation system relying on actual and potential 
competition [Sec. 40101(a)(12)]; and encourage entry into air 
transportation markets by new and existing carriers [Sec. 
40101(a)(13)].
  The interline provision will strengthen the economic viability of air 
service to small rural communities and enhance the ability of regional 
commuters and new entrants to provide essential air service. It also 
will prevent the major airlines from engaging in the anti-competitive 
behavior of excluding smaller and new entrants from the national air 
transportation network.
  When the Congress eliminated the old Civil Aeronautics Board (CAB) in 
1984, there was concern, at that time, about the abuses employed by the 
major airlines to selectively use interline agreements as an unfair 
competitive practice. During the debate on the Conference Report on the 
CAB Sunset Act, Congressman Norman Mineta said:

       In recent months there have also been concerns that the 
     larger carriers in the industry might use the right to 
     interline with them as a device to restrict competition. This 
     could be accomplished by selective refusals to interline or 
     by selective refusals on reasonable terms, based on 
     competitive considerations. Under section 411 of the Federal 
     Aviation Act, the CAB has authority to act against unfair 
     competitive practices arising from agreements to interline. 
     The conference bill transfers this authority to the 
     Department of Transportation and we expect the Department to 
     carefully monitor interlining practices to be sure that there 
     are no abuses. This will help preserve the system of 
     interlining and the major benefits it brings to consumers.

  The only way to allow for competition in this environment is to 
impose conditions on the major carriers to cooperate with their 
competitors. Interline and joint fares are necessary to ensure that the 
dominant carriers will not kill potential competitors by denying them 
access to the essential facilities of the air transportation industry: 
the major hubs. These facilities have been built with public funds and 
all carriers should have access to those facilities. Interline and 
joint fares will help create that access.
  This legislation is not a silver bullet that will alleviate all the 
air service problems facing certain parts of the country. However, it 
does carefully target certain known problems that impede airline 
competition and it establishes a badly needed program to assist small 
communities in improving their air service. I hope my colleagues will 
support this legislation.
                                 ______