[Congressional Record Volume 146, Number 120 (Monday, October 2, 2000)]
[Extensions of Remarks]
[Page E1644]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           THE UNITED/US AIRWAYS MERGER: A MATTER OF SURVIVAL

                                 ______
                                 

                            HON. BUD SHUSTER

                            of pennsylvania

                    in the house of representatives

                        Monday, October 2, 2000

  Mr. SHUSTER. Mr. Speaker, America's aviation system has been hurtling 
toward gridlock and potential catastrophes in the skies. Flight delays, 
cancellations, high fares, and complaints about customer service have 
been all too common. The problem is an aviation system that has not 
expanded to keep up with demand.
  Fortunately, help is on the way. Taking effect in October, the 
recently enacted Aviation Investment and Reform Act for the 21st 
Century (AIR 21) will provide over the next 3 years $40 billion 
primarily from the Aviation Trust Fund for new runways, gates, and 
terminals to promote expanded competition and meet the demands of the 
next century; it will also accelerate efforts to modernize our 
antiquated air traffic control system. The result will be safer travel, 
lower fares, and better service. But these changes won't come 
overnight. The problem caused by underinvestment have been festering 
for decades and will take years to fix. In fact, air service may get 
worse before it gets better.
  It is against this background of an overburdened aviation system that 
the proposed merger of United and US Airways would appear to some as 
further hurting consumers. However, the opposite is true. It is the 
status quo that will hurt consumers. And the merger will help them, not 
hurt them. Let me explain why.
  In June, the U.S. House of Representatives Committee on 
Transportation and Infrastructure, which I chair, held 2 days of 
hearings on the proposed merger. We heard from the chairmen of United, 
US Airways, and the new D.C. Air as well as the U.S. Departments of 
Justice and Transportation, plus several opponents of the merger. These 
hearings and our subsequent review have yielded much information.
  Should this merger not go forward, consumers will almost certainly 
suffer under the status quo. US Airways is headed for financial trouble 
in the next few years. It will be unable to support its current system. 
There will be no alternative but to downsize. Retrenchment probably 
won't be enough. Bankruptcy is the most likely outcome, with its 
devastating impact on consumers and service.
  Consider these facts: US Airways' labor cost of 14 cents per 
available seat mile is 40 percent higher than the 9.0 to 9.5 cent cost 
for other major carriers and almost double the 7.5 cent cost of low-
cost carriers like Southwest. At a time when other airlines have been 
making record profits, US Airways has been hemorrhaging losses. Prior 
to the second quarter of this year, it lost about $370 million over a 
9-month period. During the 1990's, US Airways has lost almost $1 
billion. All of the other mid-sized, mature-cost carriers like US 
Airways have either gone out of business (e.g., Eastern, Pan Am) or 
have gone through multiple bankruptcies (e.g., Continental, TWA).
  US Airways has a growing list of unprofitable routes and is losing 
passengers at its hubs. During the latest calendar year, only 46 
percent of its routes were profitable, down from 69 percent and 62 
percent in the two previous years. And while other airline hubs were 
growing, US Airways' three hubs in Pittsburgh, Philadelphia, and 
Charlotte were among only seven major airports that lost passengers in 
1999.
  Should the merger be approved, on the other hand, consumers will 
likely realize significant benefits. First, consumers would have for 
the first time single-carrier access to all corners of the country. 
Airline service will be improved by combining United's primarily east-
west flight network with US Airway's north-south network. United also 
plans to improve service by offering 64 new non-stop domestic flights 
and 29 non-stop international flights a day, as well as by creating 560 
new city-to-city routes. And their frequent flyer programs will be 
merged. United is committed to doing all of this while continuing to 
serve all cities currently served and capping fares for the next two 
years.
  Second, smaller cities, particularly those served by US Airways, will 
benefit from the greater international access they will receive through 
United, improving their opportunities to compete for business and 
tourism overseas. These communities will benefit from the new passenger 
demand that will be stimulated by the combined network. For example, 
United has projected that demand for service to Pittsburgh will 
increase by 33 percent from Allentown, 10 percent from Harrisburg, 16 
percent from Albany, and 10 percent from Syracuse. This increased yield 
will make short haul routes to smaller communities more profitable and 
easier to continue.
  Third, with the merger, a new low-cost carrier will be established, 
based in the Washington, DC, area. This carrier will receive slots at 
Ronald Reagan National Airport, and be able to compete against United 
and the other carriers.
  That is why the proposed United/US Airways merger is so important. In 
the best case, the merger will provide tremendous opportunities for 
growth and improved service. But even if not all of these opportunities 
materialize, consumers will still be far better off than they otherwise 
would have been under a retrenched or bankrupt US Airways.
  One final point: United's recent labor woes should not be a factor in 
evaluating the merger. These problems--similar to problems experienced 
by American and Continental in the past--are not unusual in the 
aviation industry and are transitory in nature.
  In conclusion, we need to be realistic about the prospects for US 
Airways. Consumers will be better off hitching their wagon to a big and 
strong United Airlines than a financially endangered US Airways.

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