[Congressional Record Volume 147, Number 11 (Monday, January 29, 2001)]
[Senate]
[Pages S649-S650]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. REID:
S. 199. A bill to amend title 49, United States Code, to authorize
the Secretary of Transportation to oversee the competitive activities
of air carriers following a concentration in the airline industry, and
for other purposes; to the Committee on Commerce, Science, and
Transportation.
Mr. REID. Mr. President, I rise today because I am deeply concerned
with the sudden increase in airline merger proposals. Many have
predicted that if the proposed merger of United Airlines and US Airways
is allowed to go forward, it will be followed by mergers of other major
airlines, and we will soon have an industry dominated by mega-carriers.
American Airlines recently bought Reno Air, and now is proposing a
merger of American Airlines and Trans World Airlines. If this trend
continues, we could end up with only three airlines in America. That
could drive prices sky high and cut the number of available flights,
which will be terrible for consumers.
I know first hand that mergers can hurt consumers. In my own state,
the Reno-Tahoe International Airport lost flights when American
Airlines bought Reno Air. Flights were reduced significantly and now it
is harder for people to fly in and out of the Reno and Lake Tahoe
areas.
The purpose of deregulation was to encourage competition. Evidence
seems to support a reduction in competition. It seems to be having an
opposite effect. I am very concerned with the recent airline merger
proposals and the merger frenzy that may follow. We must maintain as
much competition as possible in the airline industry.
This legislation will protect consumers against monopolistic abuses.
I emphasize that this type of legislation is not my preferred
approach--I would greatly prefer to continue to have consumers
protected by adequate competition in a free market.
I emphasize that the bill is not a ``deregulation'' bill. Airlines
will remain free to set prices and provide service without prior
government approval. However, the bill will give DOT authority to
intervene if the airlines take unfair advantage of the absence of
sufficient competition.
We are at a critical juncture for the future of a competitive airline
industry. The inescapable lesson of 22 years of deregulation is that
mergers and a reduction in competition often lead to higher fares for
the American traveling public. We cannot stand idly by and allow the
benefits of deregulation to be derailed by a wave of mergers.
Mr. President, my bill will take effect as a result of consolidation
or mergers that occur between two or more of the top seven airline
carriers, or if three or fewer of those air carriers control more than
70% of domestic revenue passenger miles. Highlights of my Airline
Competition Preservation bill are as follows:
Monopolistic Fares--The Secretary of Transportation is authorized to
require reduction in fares that are unreasonably high. The factors to
be considered include:
Whether the fare in question is higher than fares charged in similar
markets; whether the fare has been increased in excess of cost
increases; and whether there is a reasonable relationship between fares
charged leisure travelers and those charged business travelers.
If a fare is found to be unreasonably high, the Secretary may order
that it
[[Page S650]]
be reduced, that the reduced fare be offered for a specified number of
seats and that rebates be offered.
Preventing Unfair Practices Against Low Fare New Entrants: If a
dominant incumbent carrier responds to low fare service by a new
entrant by matching the low fare, and offering two or more times the
low fare seats as the new entrant, the dominant carrier must continue
to offer the low fare for two years.
Increasing Competition At Hubs: If a dominant carrier at a hub
airport is taking advantage of its monopoly power by offering fares 5%
or more above industry average fares, in more than 20% of hub markets,
DOT may take steps to facilitate added competition at the hub.
Mr. President, no one wants the federal government to micro manage
private industry. But our airways are not just a private industry--they
are a public trust. People need to be able to fly across our vast
nation--to do business, to see family members, and to enjoy their
lives. If these mergers proceed without the competitive protections I
am proposing, then the ultimate irony of deregulation will be that we
will have traded government concern for the public interest, for
private monopoly control in the interests of the industry.
I ask unanimous consent that the text of the Airline Competition
Preservation Act of 2001 be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 199
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 ``Airline Competition
Preservation Act of 2001''.
SEC. 2. OVERSIGHT OF AIR CARRIER PRICING.
(a) In General.--Chapter 415 of title 49, United States
Code, is amended by adding at the end the following:
``Sec. 41512. Oversight of air carrier pricing
``(a) Effective Date.--
``(1) In general.--This section shall take effect
immediately upon a determination by the Secretary of
Transportation that 3 or fewer air carriers account for 70
percent or more of the scheduled revenue passenger miles in
interstate air transportation as a result of--
``(A) the consolidation or merger of the properties (or a
substantial portion of the properties) of 2 or more of the 7
air carriers that account for the highest number of scheduled
revenue passenger miles in interstate air transportation into
a single entity that owns or operates the properties
previously in separate ownership; or
``(B) the acquisition (by purchase, lease, or contract to
operate) of the properties (or a substantial portion of the
properties) of 1 or more of the 7 air carriers described in
subparagraph (A) by another of such carriers.
``(2) Use of data.--For the purpose of determining the
number of scheduled revenue passenger miles under paragraph
(1), the Secretary shall use data from the latest year for
which complete data is available.
``(3) Determination of air carrier concentration.--In
making a determination under paragraph (1), the Secretary
shall attribute to an air carrier those scheduled revenue
passenger miles in interstate air transportation of the air
carrier that is consolidated, merged, or acquired that are
associated with routes adopted by the remaining carrier.
``(b) Fares of Air Carriers.--
``(1) In general.--On the initiative of the Secretary or on
a complaint filed with the Secretary, the Secretary may
undertake an investigation to determine whether an air
carrier is charging a fare or an average fare for interstate
air transportation on a route that is unreasonably high.
``(2) Considerations.--In determining whether a fare or an
average fare of an air carrier for interstate air
transportation on a route is unreasonably high, the Secretary
shall consider, among other factors, whether--
``(A) the fare or average fare is higher than the fare or
average fare charged by the carrier on other routes in
interstate air transportation of comparable distances;
``(B) the fare or average fare has increased by a
significant amount in excess of any increase in the cost to
operate flights on the route; and
``(C) the range of fares specified on the route or the
carrier's entire fare system offers a reasonable balance and
a fair allocation of costs between passengers who are
primarily price sensitive and passengers who are primarily
time sensitive.
``(3) Actions in response to unreasonable fares.--If the
Secretary determines that an air carrier is charging a fare
or an average fare for interstate air transportation on a
route that is unreasonably high, the Secretary, after
providing the carrier an opportunity for a hearing, may order
the carrier--
``(A) to reduce the fare;
``(B) to offer the reduced fare for a specific number of
seats on the route; and
``(C) to offer rebates to individuals who have been charged
the fare.
``(4) Period of effectiveness of order.--An order issued by
the Secretary under this subsection shall remain in effect
for a period to be determined by the Secretary.
``(c) Actions of Dominant Air Carriers in Response to New
Entrants.--If, with respect to a route in interstate air
transportation to or from a hub airport, a dominant air
carrier at the airport--
``(1) institutes or changes its fares for air
transportation on the route in a manner that results in fares
that are lower than or comparable to the fares offered by a
new entrant air carrier for such air transportation; and
``(2) increases the passenger capacity at which such fares
are offered on the route to a level which is--
``(A) 2 or more times the capacity previously offered by
the carrier at such fares on the route; and
``(B) 2 or more times the total capacity offered by the new
entrant air carrier on the route, the dominant air carrier,
in the 2-year period beginning on the date that such fares
and additional capacity are instituted, shall continue to
offer such fares with respect to not less than 80 percent
of the highest number of seats per week for which the
dominant air carrier has offered the fares.
``(d) Ensuring Competition at Hub Airports.--
``(1) In general.--On the initiative of the Secretary or on
a complaint filed with the Secretary, the Secretary may
undertake an investigation to determine whether a dominant
air carrier at a hub airport is charging higher than average
fares at the airport.
``(2) Higher than average fares.--For purposes of paragraph
(1), the Secretary may determine that a dominant air carrier
is charging higher than average fares at a hub airport if the
carrier is charging, with respect to 20 percent or more of
its routes in interstate air transportation that begin or end
at the airport, an average fare that is at least 5 percent
higher than the average fare being charged by all air
carriers on routes in interstate air transportation of
comparable distances and density, after adjustments for costs
that are carrier or airport specific, such as passenger
facility charges or employee compensation.
``(3) Actions in response to unfair competition.--If the
Secretary determines under paragraph (1) that a dominant air
carrier is charging higher than average fares at a hub
airport, the Secretary, after providing the carrier an
opportunity for a hearing, may order the carrier to take
actions to increase opportunities for competition at the hub
airport, including--
``(A) requiring the carrier to make gates, slots, and other
airport facilities available to other air carriers on
reasonable and competitive terms;
``(B) requiring adjustments in the commissions paid by the
carrier to travel agents;
``(C) requiring adjustments in the carrier's frequent flyer
program; and
``(D) requiring adjustments in the carrier's corporate
discount arrangements and comparable corporate arrangements.
``(e) Definitions.--In this section, the following
definitions apply:
``(1) Dominant air carrier.--The term `dominant air
carrier', with respect to a hub airport, means an air carrier
that accounts for more than 50 percent of the total annual
boardings at the airport in the preceding 2-year period or a
shorter period specified in paragraph (3).
``(2) Hub airport.--The term `hub airport' means an airport
that each year has at least .25 percent of the total annual
boardings in the United States.
``(3) Interstate air transportation.--The term `interstate
air transportation' includes intrastate air transportation.
``(4) New entrant air carrier.--The term `new entrant air
carrier', with respect to a hub airport, means an air carrier
that accounts for less than 5 percent of the total annual
boardings at the airport in the preceding 2-year period or in
a shorter period specified by the Secretary if the carrier
has operated at the airport less than 2 years.''.
(b) Conforming Amendment.--The analysis for such chapter is
amended by adding at the end the following:
``41512. Oversight of air carrier pricing.''.
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