[Congressional Record (Bound Edition), Volume 147 (2001), Part 4]
[House]
[Pages 5361-5362]
[From the U.S. Government Publishing Office, www.gpo.gov]



          REGARDING THE RE-REGULATION OF THE AIRLINE INDUSTRY

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Illinois (Mr. Lipinski) is recognized for 5 minutes.
  Mr. LIPINSKI. Mr. Speaker, before I get into my Special Order, since 
the gentleman from Maryland (Mr. Hoyer) is still here, I simply want to 
say that the reason the Duke Blue Devils won the NCAA championship is 
because the referees managed to foul out almost every Big 10 player 
that was in the tournament, and the second reason is the fact that the 
coach of the Blue Devils happens to be of Polish-American heritage from 
the city of Chicago.
  American Airlines' acquisition of TWA, which declared bankruptcy in 
January, is nearly complete. The American-TWA transaction was approved 
in March by a U.S. bankruptcy court judge. The Department of Justice 
issued a statement declaring that the agency would not challenge the 
merger, in essence, approving it.
  The Department of Transportation is currently working on the transfer 
of TWA's certificates and international routes to American Airlines. 
Although American Airlines must still survive some legal challenges 
during the bankruptcy appeals process, and, more importantly, gain 
approval from its unions, it will, by the end of this month, acquire 
190 TWA planes, 175 TWA gates at airports throughout the Nation, 173 
TWA slots at the four slot-controlled airports, TWA's hub in St. Louis, 
and 20,000 TWA employees.
  As a result, American Airlines will now enjoy the title of the 
world's largest airline with a 20 percent share of the U.S. domestic 
market.
  Unfortunately, American Airlines' quest to become bigger does not end 
there. American Airlines has also joined in the fray of the proposed 
United-USAirways merger.
  Last summer, United Airlines announced plans to purchase USAirways 
for a total of $11.6 billion. Now American Airlines plans to pay United 
Airlines $1.2 billion for 20 percent of the

[[Page 5362]]

USAirways' assets, which includes 86 jets and 14 gates at six East 
Coast airports.

                              {time}  1900

  As part of the deal, American and United would join together to 
operate the highly lucrative shuttle routes between Washington, D.C., 
New York, and Boston, which are now operated by US Airways. In 
addition, American Airlines is willing to pay $82 million for a 49 
percent stake in DCAir, the airline created to allay antitrust concerns 
about the proposed United-US Airways merger. DCAir plans to take over 
most of US Airways' operation at Reagan Washington National Airport.
  If approved, United Airlines and its arch rival, American Airlines, 
will control half of the U.S. air travel market. Delta Airlines, United 
and America's next biggest competitor, will be left behind with only 18 
percent of the domestic U.S. market.
  In response to this unprecedented consolidation of the airline 
industry, the CEO of the low-fare airline AirTran called the proposed 
merger one of the most brazen attempts by any two dominant businesses 
in any industry to simply accomplish together what they so vigorously 
resisted in recent years, the reregulation of the airline industry. 
However, instead of the Federal Government doling out routes and 
dividing up airport assets, it is the airlines themselves that are 
gobbling up their weaker rivals and carving up the Nation.
  With new hubs in Charlotte, Pittsburgh and Philadelphia to complement 
the existing operation at Washington-Dulles, United will rule the 
eastern seaboard in a proposed merger era. American will dominate the 
Midwest with the addition of St. Louis to its hubs at Dallas-Fort Worth 
and Chicago O'Hare. American will also have a significant presence at 
Reagan Washington National and New York's Kennedy airports.
  Faced with this tremendous market power possessed by a combined 
United-US Airways and a combined American-TWA-US Airways, the remaining 
network carriers, namely Delta Airlines, Northwest Airlines and 
Continental, will have to merge in some fashion to survive. This is the 
only way that they can acquire the size and scale necessary to compete 
in a rapidly consolidating industry. Therefore, in a postmerger era, it 
will not be two megacarriers dividing up half of the U.S. market, but, 
rather, three or four megacarriers controlling 80 percent of the U.S. 
market.
  Low-fare carriers will have to compete vigorously for the remaining 
20 percent. This is, of course, if the megacarriers allow them to 
survive. Even today, when competition supposedly is alive and well, 
major carriers use their power to frustrate new entrant carriers and 
drive smaller competitors out of their established hubs.
  The major carriers use everything in their power, including airplane 
capacity, airport assets, and frequent flier programs, to squash 
competition from low-fare, new entrant airlines. Yet, the major 
carriers do not vigorously compete with one another. The U.S. 
Department of Transportation (DOT) found that major network airlines 
have raised fares the most in markets where they compete only with one 
another. When they are forced to compete against a low-fare carrier, 
prices have not risen nearly as much. In fact, according to the DOT, in 
a market lacking a discount competitor, 24.7 million passengers per day 
pay on average 41 percent more than their counterparts in a hub market 
with a low-fare competitor.
  Three mega-carriers will have mega-market power and even more tools 
to drive out and keep out new competition. And, if six major carriers 
do not compete against each other today, why would three mega-carriers 
compete against each other in a post-merger tomorrow? Therefore, if the 
U.S. airline industry is allowed to consolidate, we will be left with 
essentially a re-regulated airline industry where the airlines call the 
shots and set the fares. With so few choices, airlines would have a 
captive consumer. Customer service would decline--if that is even 
possible given the level it is at today--and fares would increase. It's 
a lose-lose situation for customers. In that case, the federal 
government will have no choice but to step in and, in the public 
interest, assume its role as regulator. That's right. I firmly believe 
that if there are only three or four mega-carriers serving the U.S. 
market, the federal government will once again have to regulate the 
airline industry--overseeing fares, routes, and access to airports--in 
order to ensure a healthy state of competition.

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