[Senate Report 107-130]
[From the U.S. Government Publishing Office]
Calendar No. 300
107th Congress
1st Session SENATE Report
107-130
_______________________________________________________________________
AVIATION COMPETITION RESTORATION ACT
__________
R E P O R T
of the
COMMITTEE ON COMMERCE, SCIENCE,
AND TRANSPORTATION
on
S. 415
December 19 (legislative day, December 18), 2001.--Ordered to be
printed
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
one hundred seventh congress
first session
ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska
Virginia CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota OLYMPIA SNOWE, Maine
RON WYDEN, Oregon SAM BROWNBACK, Kansas
MAX CLELAND, Georgia GORDON SMITH, Oregon
BARBARA BOXER, California PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri GEORGE ALLEN, Virginia
BILL NELSON, Florida
Kevin D. Kayes, Staff Director
Moses Boyd, Chief Counsel
Gregg Elias, General Counsel
Mark Buse, Republican Staff Director
Jeanne Bumpus, Republican General Counsel
(ii)
Calendar No. 300
107th Congress Report
SENATE
1st Session 107-130
======================================================================
AVIATION COMPETITION RESTORATION ACT
_______
December 19 (legislative day, December 18), 2001.--Ordered to be
printed
_______
Mr. Hollings, from the Committee on Commerce, Science, and
Transportation, submitted the following
R E P O R T
[To accompany S. 415]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 415) ``A Bill to amend title
49, United States Code, to require that air carriers meet
public convenience and necessity requirements by ensuring
competitive access by commercial air carriers to major cities,
and for other purposes'', having considered the same, reports
favorably thereon with an amendment (in the nature of a
substitute) and recommends that the bill (as amended) do pass.
Purpose of the Bill
The purpose of the Aviation Competition Restoration Act
(ACRA), S. 415, is to ensure competitive access to gates,
facilities, and other assets at the nation's largest airports.
Background and Needs
In 1978, believing that competition among airlines would
improve air service and lower fares for the traveling public,
Congress passed the Airline Deregulation Act of 1978. This
landmark legislation phased out federal government control over
ticket prices, routes, and services, and preempted local
actions to regulate such activities.
Many argue and some independent studies have indicated that
airline deregulation has brought better service at lower prices
to the majority of communities and consumers around this
country. Generally, the development of hub-and-spoke network
systems and the creation of other types of new service have
provided the flying public with more service options. By
bringing passengers from multiple origins (the spokes) to a
common point (the hub) and placing them on new flights to their
ultimate destination, the hub-and-spoke system provides for
more frequent flights and more travel options to many
communities. Yet, over time, the network system has resulted in
less competition in some areas. At each of 20 major airports,
only one carrier and its affiliates dominate service and where
there is such a dominant carrier at a hub airport with barriers
to entry, higher air fares have resulted. For example,
travelers in cities with major hubs have few choices when
taking short-haul, nonstop flights because the hubbing carrier
often controls 50 percent or more of the local passenger
traffic. According to the Department of Transportation (DOT),
in the January 2001 Dominated Hub Fares study, airfares at so-
called ``fortress hub airports'' are 41 percent higher than at
hubs with greater competition. In short-haul hub markets
without a low-fare carrier, passengers pay 54 percent more on
average than passengers in comparable markets with low-fare
carriers.
According to a 1996 study conducted by the General Accounting
Office (GAO), low-fare point-to-point carriers are the driving
force behind the benefits of airline deregulation. The entrance
of a new low-fare carrier injects competition into a market
and, typically, results in new service being added by both
established carriers and the new entrant. This so-called
Southwest Effect (named after Southwest Airlines) has made
attracting low-fare service a top priority for local business
and community leaders. In an April 1996 study, DOT estimated
that almost 40 percent of domestic passengers traveled in
markets with low-fare competition, saving consumers an
estimated $6.3 billion in air fares. DOT has attributed
virtually all of the domestic growth in service and declines in
average fares in recent years to this growing form of
competition.
To compete in a market, an air carrier must have access to
airport facilities such as gates, ticket counters, and baggage
carousels. Specific airport-air carrier practices such as
exclusive-use gate-lease agreements and majority-in-interest
clauses have limited the ability of new entrants and smaller
carriers to compete with established carriers. Restrictive gate
leases, some of which last up to twenty years, at many airports
have helped single carriers dominate local markets. New
entrants, including Sun Country Airlines and Air Tran, have
testified before Congress that, even when gates and other
facilities are not being used, airlines hoard gates and do not
make them available to potential competitors, preferring to
maintain a competitive advantage by stifling new entry. When
gates are available, they are typically at non-preferred times
or higher costs. AirTran also testified that if it had just
four gates at a major airport it could provide 32-40 flights
per day, enough to provide a competitive spur to incumbent
carriers.
Since 1969, the FAA has limited the number of takeoffs and
landings (collectively known as ``slots'') at Chicago's O'Hare
International Airport, New York's LaGuardia Airport and Kennedy
International Airport, and Ronald Reagan Washington National
Airport. Because established airlines hold the rights to the
majority of takeoff and landing slots, until recently, new
entrants were almost shut out of the slot constricted airports.
Government involvement was necessary to facilitate competitive
access to these airports, and administrative and Congressional
actions have enabledsome smaller carriers to get a small
foothold. Despite the slot regulations, for example, DOT awarded 75
slots to JetBlue Airways at Kennedy. JetBlue has been thriving and
offering low fare competition to many markets. The most recent Federal
Aviation Administration reauthorization act (known as AIR-21; P.L. 106-
181) allowed several new slot exemptions at Reagan National for some
smaller carriers to provide new services at lower fares.
Since deregulation, new entrants and low-cost carriers have
not been able to maintain service in most of the new markets
(nonstop segments) that they have entered. New entrant carriers
allege that after they enter a market, incumbent carriers flood
it with below-cost tickets, and that the incumbent carriers'
``predatory pricing'' and ``predatory scheduling'' practices
prevent the new carriers from making a profit and force them to
withdraw from the market. After the new entrant is successfully
driven out, the incumbent carrier increases its airfares to
their original price, or, in some cases, a higher price.
DOT has expressed concern that responses from incumbent
carriers have strayed beyond the bounds of fair competition,
aiming instead to drive their competitors out of the market.
DOT has noted that some actions of incumbent carriers have
resulted in their obtaining much lower revenue from their
service than they would have obtained if they had responded in
a more measured fashion.
On May 13, 1999, the Department of Justice (DOJ) filed an
antitrust lawsuit against American Airlines for monopolizing
and attempting to monopolize airline passenger service to and
from Dallas/Ft. Worth International Airport. DOJ contends that
American repeatedly sought to drive small, start-up carriers
out of DFW by saturating routes with additional flights and
reducing fares. On April 27, 2001, a Federal district court
judge ruled that DOJ could not prove a case based on
traditional antitrust law principles. DOJ, however, recently
appealed the ruling.
Concentration
Since Congress passed the Airline Deregulation Act in 1978,
there have been concerns that deregulation would lead to
greater concentration. One chart put into the Commerce
Committee hearing record by Frank Borman, then CEO of Eastern
Airlines, showed the top five air carriers accounting for 68.6%
of the market in 1977. Today, the top five carriers account for
77% of the market. At the time, the Committee considered S.
415, the top five would have accounted for 83% of the market.
Because data suggest that the hubs do compete with one another
in the long haul markets, concerns about the effect of
concentration on competition have focused largely on short-haul
markets.
The National Academy of Sciences (NAS) in its 1991 study on
deregulation, Winds of Change, stated:
Several trends suggest that the industry will
continue to concentrate, which at some point might
threaten the benefits achieved during deregulation.
Additional industry concentration may occur because of
the nature of current competition among the largest
carriers offering nationwide service. Being an
effective major competitor requires, among other
things, providing service to a broad network of cities.
Only a limited number of carriers will be able to
achieve market presence in a sufficient number of large
cities to build a national network.
In addition to the trend toward concentration in the
national market, few hub airports are likely to support
more than one hubbing carrier because of the
substantial risk and cost associated with competing
with a carrier at its hub, lack of gates and terminal
space at many hub airports, and insufficient local
traffic support. These conditions create an almost
inevitable drift toward single-carrier dominance at
many hubs, which further reduces competition in
regional markets and gives the dominating carriers an
opportunity to exercise market power.
It is impossible to predict with certainty how the
pending industry shakeout will affect competition and
balance sheets. The loss of one or two carriers, for
example, may reduce excess capacity in the industry and
improve cash flow and profits for the remaining
carriers. The loss of too many carriers, however, could
reduce the amount of competition to below a level
necessary to discipline pricing.\1\
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\1\ Winds of Change, p. 2-3.
Between 1978 and 1989, during which period the authority to
approve mergers moved from the Civil Aeronautics Board, to the
DOT, to the DOJ, virtually all merger requests were approved.
The CAB approved 10 transactions from 1979 to 1984. (Only one
transaction, Continental-Western I, was rejected, but later
approved in Continental-Western II, which was overtaken by
Frank Lorenzo's bid to combine Texas Air Corporation with
Continental.) DOT approved 27 mergers.
Much of the theory of airline deregulation and analysis
during this period rested on two assumptions that, first,
actual competition existed and that, second, potential
competition was always just around the corner. Merger analysis
by the CAB, and later, DOT, relied heavily on the ability of a
carrier to possibly enter a market. If one market seemed to be
a problem, or a barrier to entry existed (e.g. gates at Denver
in the Continental-Western merger proposals), then the CAB
would look at the national, rather than the regional, market.
Using these assumptions and fluid definitions of markets, CAB
would then determine that entry was easy under deregulation
because it reasoned that aircraft could move into and out of
markets whenever fares were too high, and the CAB would approve
the deal. The flaw in this reasoning was that while aircraft
are movable, the ability of carriers to respond to new entry by
changing fares quickly made entry on a route a more difficult,
complex decision. As computers became more sophisticated in
providing and responding to fares, and hubs became increasingly
larger, the decision to enter a specific market became
difficult.
Due in part to past merger approval policies, the DOT reports
that concentration levels at specific hubs are high today.
While the degree of concentration alone does not necessarily
indicate that there is a competition problem, dominant carriers
have the ability to charge premiums on routes to and from the
hub where barriers to entry exist. In its 1991 report, Winds of
Change, the National Academy of Science defined a barrier to
entry as (a)the total inability of a firm to enter a market,
(b) the existence of costs borne by the new entrant but not borne by
the incumbent, or (c) advantages that accrue to incumbent firms because
of economies of scale and scope.
The NAS then described potential barriers to entry as (a) the
financial risk of entry, (b) airport capacity constraints that
diminish the prospects of entry, (c) environmental issues that
affect airport use and the availability and cost of aircraft,
and (d) the effects of airline marketing strategies on
competition.\2\
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\2\ Winds of Change, p. 134.
---------------------------------------------------------------------------
The concerns about competition expressed by the NAS a decade
ago were restated in the NAS's most recent report on the
aviation industry, in which it observed that:
For nearly two decades now, the literature
consistently has shown higher fares in city-pair
markets that include a concentrated hub as either the
origin or destination point; this especially applies to
short haul markets. \3\
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\3\ Study on Entry and Competition in the U.S. Airline Industry,
NAS, 1999, p. 72.
The recent NAS report also noted the ability of hub carriers
to limit entry by other carriers through control of gates.
Predatory Conduct
Traditionally, predatory pricing regulation has focused on
companies pricing their products below cost. Despite the
difficulty of proving below cost pricing, by 1997, DOT believed
that it could have taken enforcement action against a number of
carriers, but chose instead to propose rules to prevent
predatory pricing. The DOT guidelines, which focused on forgone
revenues rather than actual costs, were controversial.
Testimony regarding predatory conduct presented to the
Committee by Spirit airlines, was particularly insightful.
According to Mr. Kahan, Spirit went into the Detroit-
Philadelphia market with a fare as low as $49 and as high as
$139. Northwest then matched the fares and increased the number
of flights and seats by 15%. Eventually, according to Spirit,
lacking a frequent flyer base in Detroit (which is one of
Northwest's hubs), Spirit dropped out of the market. Mr. Kahan
indicated that Northwest immediately raised its fares to $381
for a one-way flight.
The guidelines proposed by DOT were supported by most of the
low cost carriers and opposed by the major, network carriers.
As a result, as part of the Omnibus Appropriations Act of 1998,
the National Academy of Sciences was directed to study the
issue for 6 months and submit a report to Congress. In January,
2001, DOT declined to adopt its proposed guidelines on
competition and instead issued a report, cited earlier,
detailing the competitive problems in the aviation industry.
Legislative History
On February 28, 2001, S. 415, the Aviation Competition
Restoration Act, was introduced by Senator Hollings and
cosponsored by Senators McCain, Dorgan, and Grassley. Senators
Wyden and Reid were subsequently added to S. 415 as cosponsors.
On March 12, 2001, the Committee held a hearing on S. 415 and
competition in the airline industry. Witnesses at the hearing
included representatives of the GAO, the State Attorneys
General, consumers, and small and large airlines. (The
Committee held numerous hearings on airline competition and
consolidation during the 106th Congress.) On March 15, 2001,
the Committee ordered S. 415 reported with an amendment in the
nature of a substitute containing technical and substantive
changes offered by Senators Hollings and McCain.
Summary of Major Provisions
As reported, S. 415 would:
1. Require DOT to investigate the assignment and use
of gates, facilities, and other assets by major air
carriers at the largest 35 U.S. airports to determine
whether aviation system assets are being hoarded and
whether there is meaningful, competitive access.
2. Allow DOT to require a major air carrier to make
gates, facilities, and other assets available to other
carriers on terms that are fair, reasonable, and
nondiscriminatory to ensure competitive access to the
largest airports if, based on its investigation, DOT
determines that such assets are not available and that
competition would thereby be enhanced at those
airports.
3. Make it an unfair method of competition in air
transportation for a dominant air carrier at a
dominated hub airport to: (A) fail to use gates,
facilities, and other assets fully; and (B) upon
request, refuse, deny, or fail to provide a gate,
facility, or other underused asset to another carrier
on fair, reasonable, and nondiscriminatory terms.
4. Allow DOT, in fiscal year (FY) 2002, to make up to
$300 million in Airport Improvement Program (AIP)
grants for the construction of gates, related
facilities, and other assets to enhance and increase
competition among air carriers for passenger air
transportation.
Estimated Costs
In accordance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 25, 2001.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 415, the Aviation
Competition Restoration Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark Hadley
(for federal costs), Victoria Heid Hall (for the state and
local impact), and Jean Talarico (for the private-sector
impact).
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
Congressional Budget Office Cost Estimate
S. 415--Aviation Competition Restoration Act
Summary: S. 415 would direct the Department of
Transportation (DOT) to investigate air carriers' use of
landing slots and facilities at the 35 largest airports, and to
determine whether reassigning those assets would improve
competition between air carriers. Under the bill, DOT could
require an air carrier to relinquish airport landing slots and
facilities if the agency determines that such assets are not
fully utilized or made available to other carriers and that
divestiture would improve competition. S. 415 also would
authorize the Secretary of Transportation to order air carriers
to stop hoarding landing slots and facilities that are
underused at the largest airports. Finally, the bill would
authorize the appropriation of $300 million to provide grants
to construct new gate facilities if they are necessary to
ensure competition among air carriers at the largest airports.
Based on the spending patterns of current grant programs
for airports and on information from DOT, CBO estimates
implementing S. 415 would cost about $294 million over the
2001-2006 period, assuming appropriation of the necessary
amounts. Because S. 415 would not affect direct spending or
receipts, pay-as-you-go procedures would not apply.
S. 415 contains both an intergovernmental and private-
sector mandate as defined in the Unfunded Mandates Reform Act
(UMRA) because it would authorize the Secretary of
Transportation to break contractual arrangements between public
airport operators and private air carriers under certain
conditions. CBO estimates that the cost to comply with the
intergovernmental mandate would not exceed the threshold
established by UMRA ($56 million in 2001, adjusted annually for
inflation). CBO cannot determine whether the direct cost to the
private sector would exceed the annual threshold defined by
UMRA ($113 million in 2001, adjusted annually for inflation)
because new requirements on air carriers would depend on
specific standards that would be established by the Secretary
of Transportation, and because information on financial and
business arrangements between air carriers and airports is not
available.
Estimated cost to the Federal Government: For this
estimate, CBO assumes S. 415 will be enacted during fiscal year
2001 and that the estimated amounts will be appropriated for
each year. The estimated budgetary impact of S. 415 is shown in
the following table. The costs of this legislation fall within
budget function 400 (transportation).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------
2001 2002 2003 2004 2005 2006
----------------------------------------------------------------------------------------------------------------
Spending Subject to Appropriation
Estimated Authorized Level...................................... 1 301 1 1 1 1
Estimated Outlays............................................... 1 52 127 67 31 16
----------------------------------------------------------------------------------------------------------------
Basis of estimate: S. 415 would direct the Department of
Transportation to investigate air carriers' use of landing
slots and facilities at the 35 largest airports within 90 days
of its enactment. Based on information from DOT, COB estimates
that conducting this investigation and issuing regulations to
implement its findings would cost about $1 million in 2001.
S. 415 would authorize the appropriation of $300 million in
2002 for grants to construct gates if they are necessary to
ensure competition among airlines at the largest airports. For
this estimate, CBO assumes DOT will find that such grants are
necessary. Based on the spending patterns of current grants to
airports, CBO estimates implementing this provision would cost
about $288 million over the 2002-2006 period.
Under the bill the Department of Transportation could
require an air carrier to relinquish airport assets (i.e.,
gates or other facilities). Based on information from DOT
concerning the cost of litigation, CBO estimates that
implementing this provision would cost about $1 million a year
over the 2002-2006 period.
Pay-as-you-go considerations: None.
Intergovernmental and private-sector impact: S. 415
contains both an intergovernmental and private-sector mandate
as defined in UMRA because it would authorize the Secretary of
Transportation to break contractual arrangements between public
airport operators and private air carriers if the Secretary
determines that airport gages, facilities, and landing slots
are not available or are underutilized and competition would be
increased by reallocation of those resources.
CBO estimates that breaking contractual agreements would be
unlikely to have a significant impact on airport revenues
because any lost gate fees and airfield fees from one air
carrier would likely be offset by fees from the new air carrier
gaining access to the airport gates and facilities. The bill
would impose no significant cost on airport authorities and
costs would not exceed the threshold established by UMRA ($56
million in 2001, adjusted annually for inflation) for
intergovernmental mandates. S. 415 would benefit airports by
authorizing the appropriation of $300 million in fiscal year
2002 for grants to enhance competition among air carriers at
certain airports. The conditions on such grants would be
entered into voluntarily by airports.
The loss of revenues to those air carriers that would be
required to relinquish their airport facilities and landing
slots would be a gain to the air carriers that would have
access to those facilities and slots. CBO cannot determine if
the net effect to the air carriers in aggregate would exceed
the threshold for private-sector mandates ($113 million in
2001, adjusted annually for inflation) because we do not know
how often the Secretary would use the authority provided in
this bill or how air carriers would respond to the loss or gain
of facilities and landing slots. Moreover, details about
current and future contracts are not available.
Estimate prepared by: Federal Costs: Mark Hadley, Impact on
State, Local, and Tribal Governments; Victoria Heid Hall,
Impact on the Private Sector: Jean Talarico.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Regulatory Impact Statement
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following evaluation of the regulatory impact of the
legislation, as reported:
NUMBER OF PERSONS COVERED
Under section 3, major air carriers may be required to make
available gates, facilities, and other assets at the 35 largest
airports if DOT determines that there is a lack of competitive
access and that competition would be enhanced by doing this.
Section 4 would subject all major air carriers to the
possibility of DOT civil enforcement action for engaging in
behavior that fits the expanded definition of unfair methods of
competition, which is one of the following actions at a
dominated hub (where the carrier has more than 50 percent of
the passenger traffic): (1) failure to utilize gates,
facilities, and other assets fully; and (2) upon request,
refusal, denial, or failure to provide a gate, facility, or
other underutilized asset to another carrier on fair,
reasonable, and nondiscriminatory terms.
ECONOMIC IMPACT
Section 3 could reduce air fares for 25-50 million passengers
that today are without effective competition. While incumbent
air carriers could be required to make room for new entrants,
the number of gates that might be needed to provide effective
competition at the nation's top 35 airports, and the extent to
which carriers want to serve those specific airports, is not
known. Airport proprietors generally lease gates to carriers,
and if a carrier were required to sublease or return a gate to
the proprietor, the air carrier would save the cost of the
lease payment. At many of the largest hubs, the dominant
carrier controls entire concourses with multiple gates. In most
cases, it is anticipated that carriers will be able to share
gates, or gates will be built by the airport operator. It is
not clear to what extent making a gate or a few gates available
would impact incumbent carriers. In addition, while dominant
carriers allege that they would be forced to cut service to
small communities, protections are included in the bill to
ensure that this does not occur. The bill does not cover
commuter gates, which generally are used to service aircraft
that serve small communities. Smaller air carriers and
consumers would benefit from increased competition brought
about by the enhanced availability of gates, facilities, and
other assets at the 35 largest airports.
Section 4 may cause dominant air carriers at dominated hub
airports that engage in the unfair methods of competition
delineated in this section to incur fines imposed by DOT.
Consumers and smaller carriers may experience economic gains if
major carriers are deterred from engaging in unfair methods of
competition that restrict competitive access at key airports.
Section 5 authorizes $300 million in FY 2002 for DOT to make
grants for gates, related facilities, and other assets to
enhance and increase competition among air carriers for
passenger air transportation. Grants that expand access to
restricted airports would benefit consumers and smaller
carriers by increasing competition.
PRIVACY
The bill will not have any adverse impact on the personal
privacy of the individuals affected.
PAPERWORK
Section 3 will increase paperwork for DOT for investigation
of the use of assets by major air carriers at the largest U.S.
airports. It may increase paperwork for major air carriers to
make assets available to other carriers and for other carriers
to procure such assets.
Section 4 may increase paperwork for DOT to enforce penalties
for the delineated unfair methods of competition in air
transportation by dominant air carriers at dominated hub
airports.
Section 5 may increase paperwork in FY 2002 for DOT and
airports associated with the issuance of AIP grants to enhance
competitive access.
Section-by-Section Analysis
Section 1. Short Title
This section states that the short title of the bill is the
``Aviation Competition Restoration Act''.
Section 2. Findings
This section sets forth ten congressional findings
establishing the general basis for enactment of the bill.
Section 3. Competitive Access to Gates, Facilities, and Other Assets
This section requires the Secretary to investigate the
assignment and usage of gates, facilities, and other assets by
major air carriers at the largest 35 domestic airports (in
terms of air passenger traffic). It gives the Secretary the
authority to require a major air carrier to relinquish gates,
facilities, and other assets so that they may be made available
to other carriers on terms that are fair, reasonable, and
nondiscriminatory to ensure competitive access to such airports
if the Secretary determines that such assets are not available
and that competition would, thereby, be enhanced at those
airports.
Airlines have argued that if they are required to relinquish
gates, facilities, and other assets to make room for
competition at constricted hub airports, air service to small
communities will be cut first because of the thin profit
margins on such routes. However, some airlines may be
underutilizing such assets in order to limit competition. If
that is the case, there is room to maintain existing service to
small communities and accommodate increased competition.
Nevertheless, this section explicitly protects service to small
communities by excluding gates, facilities, and other assets
used exclusively by commuter air carriers (also known as
regional airlines) from the scope of the Secretary's powers.
Access to these key hubs is protected for these smaller
carriers because they provide most of the air service to small
communities.
This section also contains definitions for a variety of the
terms used in the statutory language. For example, the
definition of ``major air carrier'' is modeled directly on the
one used by DOT and is tied to the percentage of total domestic
scheduled-passenger revenues earned by an airline in the 12-
month period ending March 31 of each year. There are also
definitions for dominant air carrier (more than 50 percent of
the enplaned passengers at an airport), commuter air carrier,
asset (which includes slots and slot exemptions), and passenger
enplanements.
Section 4. Unfair Methods of Competition
This section makes it an unfair method of competition in air
transportation for a dominant air carrier at a dominated hub
airport to: (1) fail to use gates, facilities, and other assets
fully at that airport; and (2) refuse, deny, or fail to provide
a gate, facility, or other underused asset at such an airport
to another carrier on fair, reasonable, and nondiscriminatory
terms upon request of the airport, another air carrier, or the
Secretary. An air carrier seeking access to a dominated hub
must file with the Secretary a copy of the request it has made
to the dominant carrier. This section also codifies an existing
provision of law (regarding the Secretary's duty to ensure
access to some airports) that had been enacted as section 155
of Public Law 106-181 (AIR-21).
Section 5. AIP Competition Funding
This section authorizes $300 million in FY02 for the
Secretary to make grants for gates, related facilities, and
other assets to enhance and increase competition among air
carriers for passenger air transportation. If determined
necessary to ensure competitive access at any of the 35 largest
airports, the Secretary would make gate construction projects
eligible for Airport Improvement Program (AIP) funding. (Gates
are not currently eligible for AIP funding.) Any gate-related
AIP projects must adhere to the relevant regulatory standards
that apply to gates constructed using Passenger Facility Charge
funds.
Rollcall Votes in Committee
In accordance with paragraph 7(c) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following description of the record votes during its
consideration of S. 415:
Senators Hollings and McCain offered an amendment in the
nature of a substitute to make technical and substantive
changes. On a rollcall vote of 12 yeas and 10 nays as follows,
the Managers' amendment was adopted:
YEAS--12 NAYS--10
Mr. Hollings Mr. Rockefeller
Mr. Inouye Mr. Cleland
Mr. Kerry Mr. Stevens
Mr. Breaux Mr. Burns
Mr. Dorgan Mr. Lott
Mr. Wyden Mrs. Hutchison
Mrs. Boxer Ms. Snowe
Mr. Edwards Mr. Brownback\1\
Mrs. Carnahan Mr. Smith\1\
Mr. McCain Mr. Allen\1\
Mr. Fitzgerald
Mr. Ensign
\1\ By proxy.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the Standing
Rules of the Senate, changes in existing law made by the bill,
as reported, are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new material is printed
in italic, existing law in which no change is proposed is shown
in roman):
TITLE 49. TRANSPORTATION
SUBTITLE VII. AVIATION PROGRAMS
PART A. AIR COMMERCE AND SAFETY
SUBPART II. ECONOMIC REGULATION
CHAPTER 417. OPERATIONS OF CARRIERS
SUBCHAPTER I. REQUIREMENTS
* * * * * * *
Sec. 41712. Unfair and deceptive practices and unfair methods of
competition
(a) In General.--On the initiative of the Secretary of
Transportation or the complaint of an air carrier, foreign air
carrier, or ticket agent, and if the Secretary considers it is
in the public interest, the Secretary may investigate and
decide whether an air carrier, foreign air carrier, or ticket
agent has been or is engaged in an unfair or deceptive practice
or an unfair method of competition in air transportation or the
sale of air transportation. If the Secretary, after notice and
an opportunity for a hearing, finds that an air carrier,
foreign air carrier, or ticket agent is engaged in an unfair or
deceptive practice or unfair method of competition, the
Secretary shall order the air carrier, foreign air carrier, or
ticket agent to stop the practice or method.
(b) E-Ticket Expiration Notice.--It shall be an unfair or
deceptive practice under subsection (a) for any air carrier,
foreign air carrier, or ticket agent utilizing electronically
transmitted tickets for air transportation to fail to notify
the purchaser of such a ticket of its expiration date, if any.
(c) Underutilization of Gates, Facilities, or Other Assets.--
(1) In general.--It is an unfair method of
competition in air transportation under subsection (a)
for a dominant air carrier at a dominated hub airport--
(A) to fail to utilize gates, facilities, and
other assets fully at that airport; and
(B) to refuse, deny, or fail to provide a
gate, facility, or other asset at such an
airport that is underutilized by it, or that
will not be fully utilized by it within 1 year,
to another carrier on fair, reasonable, and
nondiscriminatory terms upon request of the
airport, the other air carrier, or the
Secretary.
(2) Requesting carrier must file with dot.--An air
carrier making a request for a gate, facility, or other
asset under paragraph (1) shall file a copy of the
request with the Secretary when it is submitted to the
dominant air carrier.
(3) Availability of gates and other essential
services.--The Secretary shall ensure that gates and
other facilities are made available on terms that are
fair and reasonable to air carriers at covered airports
where a `majority-in-interest clause' of a contract or
other agreement or arrangement inhibits the ability of
the local airport authority to provide or build new
gates or other essential facilities.
(4) Definitions.--In this subsection:
(A) Dominant air carrier.--The term
``dominant air carrier'' has the meaning given
that term by section 41722(c)(2).
(B) Dominated hub airport.--The term
``dominated hub airport'' means an airport--
(i) that each year has at least .25
percent of the total annual boardings
in the United States; and
(ii) at which 1 air carrier accounts
for more than 50 percent of the
enplaned passengers.
(C) Covered airport.--The term ``covered
airport'' has the meaning given that term by
section 47106(f)(3).
(D) Asset.--The term ``asset'' includes slots
(as defined in section 41714(h)(4)) and slot
exemptions (within the meaning of section
41714(a)(2)).
* * * * * * *
Sec. 41722. Competitive access to gates, facilities, and other assets
(a) DOT Review of Gates, Facilities, and Assets.--Within 90
days after the date of the enactment of Aviation Competition
Restoration Act, the Secretary of Transportation shall
investigate the assignment and usage of gates, facilities, and
other assets by major air carriers and their affiliated
carriers (other than commuter air carriers) at the largest 35
airports in the United States in terms of passenger
enplanements. The investigation shall include an assessment
of--
(1) whether, and to what extent, gates, facilities,
and other assets are being fully utilized by major air
carriers and their affiliated carriers at those
airports;
(2) whether gates, facilities, and other assets are
available for competitive access to enhance
competition; and
(3) whether the reassignment of gates, facilities,
and other assets to, or other means of increasing
access to gates, facilities, and other assets for, air
carriers (other than dominant air carriers) would
improve competition among air carriers at any such
airport or provide other benefits to the flying public
without compromising safety or creating scheduling,
efficiency, or other problems at airports providing
service to or from those airports.
(b) Authority of Secretary To Make Gates, Etc., Available.--
(1) In general.--The Secretary shall require a major
air carrier and its affiliated carrier, upon
application by another air carrier or on the
Secretary's own motion, to relinquish gates,
facilities, and other assets available so that those
facilities may be leased by the airport sponsor, or, in
the case of slots, be reallocated by the Secretary, to
other air carriers on terms that are fair, reasonable,
and nondiscriminatory to ensure competitive access to
those airports if the Secretary determines, on the
basis of the investigation conducted under subsection
(a), that such gates, facilities, and other assets are
not available, or are underutilized, and that
competition would be enhanced thereby at those
airports.
(2) Protection of small communities.--Paragraph (1)
does not apply to any gate, facility, or asset
exclusively used by a commuter air carrier.
(c) Definitions.--
(1) Major air carrier.--In this section the term
``major air carrier'' means an air carrier certificated
under section 41102 that accounted for at least 1
percent of domestic scheduled-passenger revenues in the
12 months ending March 31 of each year, as reported to
the Department of Transportation pursuant to part 241
of title 14, Code of Federal Regulations, and
identified as a reporting carrier periodically in
accounting and reporting directives issued by the
Office of Airline Information.
(2) Dominant air carrier.--The term ``dominant air
carrier'' means an air carrier that accounts for more
than 50 percent of the enplaned passengers at an
airport.
(3) Commuter air carrier.--The term ``commuter air
carrier'' has the meaning given it by section
41714(h)(1).
(4) Asset.--The term ``asset'' includes slots (as
defined in section 41714(h)(4)) and slot exemptions
(within the meaning of section 41714(a)(2)).
(5) Affiliated carrier.--The term ``affiliated
carrier'' has the meaning given it by section 41714(k).
(6) Passenger enplanements.--The term ``passenger
enplanements'' means the annual number of passenger
enplanements, as determined by the Secretary of
Transportation, based on the most recent data
available.
CHAPTER 471. AIRPORT DEVELOPMENT
* * * * * * *
Sec. 47138. Competition enhancement program
(a) In General.--Notwithstanding any provision of this title
to the contrary, the Secretary of Transportation may make
project grants under this subchapter from the Airport and
Airway Trust Fund for gates, related facilities, and other
assets to enhance and increase competition among air carriers
for passenger air transportation, selected by the Secretary on
a case-by-case basis, at airports described in section
41722(a). In carrying out this subsection, the Secretary shall
give priority to gates that will enhance service to small and
medium-sized communities.
(b) Secretary May Incur Obligations.--The Secretary may incur
obligations to make grants under this section.
(c) Consistency of Requirements.--
(1) In general.--The Secretary shall make gates
eligible for project funding under chapter 471 at any
airport described in section 41722(a) where the
Secretary determines that such funding is necessary to
ensure competitive access at that airport.
(2) Parity between aip-financed and pfc-financed
gates.--The Secretary shall by regulation require that
projects related to gates described in paragraph (1)
are subject, to the extent appropriate, to the
requirements set forth in Appendix A to part 158 of
title 14 of the Code of Federal Regulations for--
(A) non-exclusivity of contractual
agreements;
(B) carryover provisions; and
(C) competitive access.
(d) Authorization of Appropriations.--There are authorized to
be appropriated from the Airport and Airway Trust Fund
$300,000,000 for fiscal year 2002, such amount to remain
available until expended.