OST-97-2230 / OST-97-2442 / OST-97-2557 / OST-95-277 / O'Hare and LaGuardia Slots / July 9, 1997
Application of Frontier Airlines for an exemption from 14 C.F.R. Part 93, Subpart K and S. pursuant to Section 206 C (l) of the Federal Aviation Act of 1996
Application of ValuJet Airlines, Inc. for an exemption from 14 C.F.R. Part 93, Subpart K and S. pursuant to Section 206 C(l) of the Federal Aviation Act of 1996
Application of Air Tran Airways, Inc. for an exemption from 14 C.F.R. Part 93, Subpart K and S. pursuant to Section 206 C(l) of the Federal Aviation Act of 1996
Application of Western Pacific, Inc. for an exemption from 14 C.F.R. Part 93, Subpart K and S. pursuant to Section 206 C(l) of the Federal Aviation Act of 1996
MOTION FOR LEAVE TO FILE AN ANSWER AND ANSWER
OF AIR CARRIER ASSOCIATION OF AMERICA
OPEN SKIES IN THE UNITED STATES OF AMERICA
1. MOTION FOR LEAVE TO FILE AN ANSWER
The Air Carrier Association of America hereby moves for leave to file an Answer to respond to the various Answers filed regarding the Applications of Frontier Airlines, ValuJet Airlines, Inc., Air Tran Airways, Inc., and Western Pacific, Inc. ("affordable fare carriers") to gain access to LaGuardia Airport in New York City ("LaGuardia"). LaGuardia is a high density airport, currently dominated by the large carriers. The filing of these comments is necessary in order to ensure that the following is placed in the record:
- Comments made during the past several weeks by large carriers appearing before Congress on the BA/AA proposal that directly conflict with comments submitted in the above dockets. Those inconsistent statements question the veracity of comments filed by those large carriers and should be on the record and brought to the attention of Departmental decision makers.
- An admission by Stuart J. Oran, Executive Vice President and
General Counsel of United Airlines that United does not use all of its slots! In referring to United's operations at O'Hare international Airport, Mr. Oran stated, "We're not using the slots we have." (United's Plan to Fix O'Hare 's Crowded Skies, Crain's Business, Apr. 21, 1997, at 3). /1
Accordingly, it is respectfully requested that the Secretary accept the filing of this Answer which will underscore the hypocrisy of the anticompetitive positions espoused by several large airlines and their surrogates in a continuing attempt to prevent new entry and competition at the nation's high density airports.
II. THE APPLICATIONS OF FRONTIER, VALUJET, AIRTRAN AND WESTERN PACIFIC SHOULD BE GRANTED
The Secretary of Transportation has broad statutory authority to grant the requests of these affordable fare carriers for slots at the high density airports. Although these affordable fare carriers have asked to be allocated slots pursuant to 49 U.S.C. § 4171(c), the Secretary may grant those requests under the general authority contained in the Federal Aviation Act of 1958, as amended, and the high density regulations.
1/ Mr. Oran's statement most likely reflects United's practices at all high density airports and is indicative of the practices of all large carriers -- manipulating slot usage to comply with use-or-lose requirements while at the same time blocking new entrants at the high density airports.
The Secretary has the following options for meeting the requests of the affordable fare carriers for slots:
1. Allocate exemption slots; /2 or
2. Withdraw slots from incumbent carriers and re-allocate them to the affordable fare carriers; or
3. Require the U.S. partners of the foreign carriers holding exemption slots at LaGuardia and O'Hare to provide those slots to the affordable fare carriers and withdraw the exemption slots held by the foreign carriers and then allocate them to affordable fare carriers.
III. BACKGROUND
The high density slot regulations were adopted in the late 1960's to control traffic and alleviate congestion at busy airports. When the slot regulations were first implemented, the incumbent carriers were given the slots needed to support their operations. During the 1970's and 1980's, the large carriers distributed slots among themselves through "scheduling committees." As new entrants attempted to enter the high density airport markets, the scheduling committee process broke down, leaving new entrants without access. This was the first action by the large carriers to block new entrants from entering high density airports.
The Department of Transportation has in the past taken steps to provide for new entry at high density airports. In 1980, Secretary of Transportation Goldschmidt decided that new entry was so crucial to deregulation efforts that the Department issued Special Federal Aviation Regulation 43 ("SFAR 43"). SFAR 43 allocated 18 slots to new entrant New York Air at National
2/ The Secretary has found "exemption" slots to be available to meet international requests at LaGuardia in larger numbers than those requested by affordable fare carriers.
Airport, enabling New York Air to enter the Shuttle market. /3 [45 FR 72637, Nov 3, 1980]. The promotion of new entry was deemed so important that the slots provided to New York Air were withdrawn from all carriers including smaller carriers such as Air Florida.
The preamble to SEAR 43 made it clear that a primary objective of the Secretary of Transportation was to promote competition, even in routes that were already served. The preamble stated:
...additional low fare service in the market will increase competition and would thus be consistent with the Airline Deregulation Act. /4
The preamble also made it clear that the Department had a significant amount of authority to withdraw and allocate slots and that slots were not property belonging to the carriers. The preamble stated:
There is no property right in access to a public facility...Plainly the Department has the power to allocate them on any basis that is not arbitrary and capricious, or otherwise contrary to law.
The Secretary's quick action to allocate slots under his general statutory authority was vigorously contested by the large carriers -- who hoped to avoid increased competition. Ultimately, the Secretary's decision was upheld by the United States Court of Appeals in Northwest v. Goldschmidt, 645 F.2d 1309 (1981).
In order to replace the anticompetitive scheduling committee process, the DOT issued the buy-sell slot rules in December, 1985 (Amendment 93-49, 50 FR 5219S). Under these rules,
3/ It is ironic that Delta, (who now claims that affordable fare carriers should not be given slots), operates its shuttle with the very same slots granted to New York Air by SFAR 43. If Secretary Goldschmidt had not decided to allow badly needed new entry to New York Air back in 1980, Delta would not likely be in the shuttle business today and would probably be complaining about the need for increased competition in that lucrative market.
4/ The slots given to New York Air were for service between New York and Washington -- a rotate already served by the Eastern Shuttle.
carriers were grandfathered their existing slot holdings and allowed to buy or lease additional slots. At the time that this rule was issued. a limited number of slots were distributed to new entrants. Since that time, however, the large carriers have gradually re-acquired all of the slots intended for new entrants, thus increasing their stranglehold on the high density airports. /5
The buy-sell rules contain several provisions which set forth the authority of the Secretary to withdraw and distribute slots requested by the affordable fare carriers. These key provisions emphasize that:
1. Slots are not the property of the carriers.
Section 93.223 (a) states:
slots do not constitute a property right but represent an operating privilege subject to absolute FAA control. Slots may be withdrawn at any time...
The preamble to the regulation adds, "This amendment does not create proprietary rights in slots."
2. Slots may be withdrawn. /6
Section 93.223(c) states:
Whenever slots must be withdrawn they will be withdrawn in accordance with the priority list established under paragraph (b).
3. Slots are assigned a withdrawal number to facilitate slot withdrawal.
Section 93.223(b) states:
The FAA shall assign, by random lottery, withdrawal priority numbers for the recall priority of slots at each airport.
5/ It is important to note how much the large carriers have increased their slot holdings at the high density airports since 1980. For example, at National Airport alone, Delta held 32 slots in 1980 while today it holds 93 slots.
6 Carriers have always known that slots could be withdrawn. To avoid possible loss of slots, carriers have traded or sold slots with high withdrawal numbers.
IV. POSITIONS OF DOMINANT CARRIERS ARE INCONSISTENT WITH THEIR REQUESTS FOR INTERNATIONAL SLOTS AND FOR ACCESS TO FOREIGN AIRPORTS
At a time in which large carriers are demanding even greater access and control of international markets, they are taking completely opposite positions in the domestic marketplace where they prefer to stifle competition. Apparently, these carriers believe that it is important to have price competition in international markets if it means they can increase operations, but it is not important to provide consumers and businesses access to affordable fares into and out of the high density airports.
The hypocrisy of this position was best summarized by Bob Crandall, Chairman and CEO of American Airlines, Inc., before the Senate Aviation Subcommittee on June 4, 1997 when he stated:
For an added dose of irony, consider these facts: United holds the greatest number of slots at Chicago's O'Hare Airport and a higher percentage of O'Hare slots than British Airways and American combined will hold at Heathrow. Moreover, United holds slots at Heathrow it does not use, having loaned them to its partner, Lufthansa. Yet United continues to demand that we and British Airways divest several hundred slots at Heathrow -- while at the same time taking the position that in the United States, new entrant do not need slots at constrained airport! (emphasis added).
The large carriers control approximately 99% of the slots at the high density airports. Most of those slots were grandfathered to those carriers -- free of charge -- when the buy-sell rules were promulgated. A number of those carriers -- particularly Delta and United -- invent arguments to ensure that competition does not exist at high density airports. They clearly want to stop or at a minimum delay any possible DOT action on these requests.
During the past several months the large carriers have made numerous public statements in response to proposals to increase access to foreign markets including Heathrow. Those comments all cry for increased access and slots at foreign airports, citing, ironically, the benefits of increased competition. Yet those same commenters are waging the opposite battle in the United States, by opposing the positions of the affordable fare carriers to gain entry to O'Hare and an airport -- LaGuardia -- that is more constrained than London's Heathrow. /7 In short, while the large carriers support "open skies" throughout the world, they oppose "open skies" in the United States.
It is time for the Department of Transportation to reject the duplicitous arguments of the large carriers and create "open skies" in this country. The inability of affordable fare carriers to obtain slots prevented meaningful competition at LaGuardia and O'Hare for the summer of 1997.
To understand the absurdity of the conveniently contradictory, anti-competitive comments made by the large carriers against entry of affordable fare carriers at the high density airports, one only need examine comments made by the representatives of the large carriers themselves on the issue of access to international airports:
A. The Need for Additional Competition - but only in international markets.
Delta is prepared to compete with AAIBA in the New York market, just as we do with United and Lufthansa to Germany and with KLM and Northwest to Amsterdam. However, we face the obstacle of not being able to mount a viable competitive presence in the market due to the fact that we cannot obtain slots and other critical facilities at Heathrow
Despite Delta's position as the largest operator of nonstop transatlantic services, we lack a competitive presence in the U.S.-London market because we are prohibited from serving Heathrow. Our limited position in this market is not a reflection of our
7/ In his testimony, Mr. Crandall noted, "Since the spring of 1991, 54 new airlines have been able to secure viable slots and begin operations at Heathrow. In 1995, seven new carriers commenced Heathrow operations and in 1996, five more did so. Between 1992 and 1996, 546 weekly peak-hour slots were added at Heathrow. Between 1992 (American's first full year of Heathrow operations) and 1997, American has been able to increase its slot holdings by over one-third." (Testimony of Bob Crandall, Senate Aviation Subcommittee, June 4, 1997.) In contrast, not one affordable fare carrier has been able to, "secure viable slots" at LaGuardia during the same time period. Moreover, the only slots added have gone to Canadian carriers.
commercial interest but is a function of the restrictive and protective Bermuda II agreement between the U.S. and the U.K. In a truly open U S.-U.K. environment, Delta would be a major competitive force.
D. Scott Yohe, Senior Vice President, Governmental Affairs, Delta Airlines, before the Aviation Subcommittee of the Senate Committee on Commerce, Science and Transportation on June 4, 1997.
Without access and slots, affordable fare carriers cannot "mount a competitive presence at high density airports." Although Delta argues that it should be allowed to enter the New York-London market (as the "sixth" carrier), it argues against affordable fare carriers obtaining slots that would allow them to enter blew York-domestic markets -- including LGA-ATL (where Delta is the only carrier with 16 daily roundtrips)
Open skies would allow not only US Airways to offer service, but other carriers as well, creating a flourishing and competitive new market in transatlantic aviation with enormous benefits for travelers, communities and all airlines and their employees.
Stephen M. Wolfe, Chairman and CEO, US Airways before the Senate Antitrust, Business Rights and Competition Subcommittee, April 22, 1997.
[Opening up high density airports would create flourishing and competitive" new markets in domestic aviation.]
The legal right to fly to the U.K. will do little good if U.S. carriers do not have the Heathrow assets -- that is, slots and ground facilities -- to compete and, over time to grow.
As a result of its dominant position, the mega-alliance would have the power to control fares and exclude competitors.
Lawrence M. Nagin - Executive V. P. and General Counsel, US Airways before the Senate Antitrust, Business Rights and Competition Subcommittee, April 22, 1997.
[Large carriers -- such as Delta and United -who dominate slots and control fares at high density airports, have been able to exclude competition in the U.S.]
We simply desire to be able to compete for those same passengers.
David A. Schwarte, Managing Dir., International Affairs, American Airlines before the Senate Antitrust, Business Rights and Competition Subcommittee, April 22, 1997.
[Affordable fare carriers "desire to be able to compete" for passengers at high density airports."]
Governmental bodies should have as their dual goals freeing the industry in terms of the elements of competition and protecting their citizens from the potential for anti-competitive abuse of that new open environment. This means encouraging alliances and the conditions that foster them, but at the same time developing antimonopoly policies that provide strict scrutiny of the "superhubs" so as to maintain the opportunity for meaningful intrahub competition.
Cyril Murphy, Vice President, International Affairs, United Airlines before the Senate Antitrust, Business Rights and Competition Subcommittee, April 22, 1997.
[There cannot be "meaningful intrabub competition at high density airports" unless the affordable fare carriers are provided slots. Since United is not utilizing all of their slots, they would not be impacted if some slots were withdrawn.]
B. The Large Carriers Argue that New Entrants Should Pay for Slots at High Density Airports While They Should Be Given Slots for Free at Heathrow.
1. Predatory Comments By Large Carriers Concerning High Density Airports.
In their filings, United and Delta have argued that affordable fare carriers must use the buy-sell market. "The buy-sell market for slots is available to all carriers seeking to obtain slots to offer service in any LaGuardia Airport pair." (Answer of Delta Airlines; May 16, 1997.)
a. Pro-Competition Position of Large Carriers Concerns Heathrow.
The same carriers that insist that new entrants purchase slots at high density airports, recoil from that concept as it applies to them:
The slots U.S. carriers need must also be made available at no charge. The U.S. provides free slots to foreign carriers, including BA, operating at U.S. slot controlled airports.
Stephen Wolf
Moreover, to require entrants to purchase slots when incumbents were given them for free creates a barrier to entry in itself. Obviously, BA and AA would be in a position to control any such slot market if it were authorized, and would likely exercise their market dominance to immunize the alliance from competition.
Barry P. Simon - Senior Vice President, International Continental Airlines, Inc. before the Senate Antitrust, Business Rights and Competition Subcommittee, April 22, 1997.
True open skies also requires that new entrants be provided Heathrow slots free of charge. The U.S. Government ensures that foreign carriers, including British Airways, are able to obtain the necessary slots to provide international service from slot constrained airports in the U.S. Indeed, DOT has even taken away slots from U.S. carriers to make them available to a foreign carrier at no charge. Comity demands that U.S. carriers be provided free access to Heathrow slots. Nor is there a justification for allowing British Airways and American to charge outrageously high, artificial "market prices" for the slots they relinquish, as the mega-alliance partners have suggested. Neither British Airways nor American paid the British Government for the slots they currently use at Heathrow.
Larry Nagin
[Most of the high density slots were given to the large carriers for free. They should not be able to sell or lease these "free" slots.]
The surrender BA and AA, without compensation, of 210 weekly slots at Heathrow Airport and 84 and 42 weekly slots at New York JFK and Chicago O'Hare Airports, respectively. This would provide airport slot access for other carriers equal to the competitive services eliminated by the alliance.
Cyril Murphy
[As the dominant slot holder at O'Hare, United should be required to surrender slots without compensation.]
In sum, as the large carriers so eloquently argue, when an anti-competitive situation exists at a congested airport, comity demands that free access be given to carriers that increase competition. This argument applies equally at domestic high density airports as it does internationally.
C. The Large Carriers Are Requesting Large Numbers of Slots at Heathrow, Yet They Complain About the Slot Numbers Requested by the New Entrants at the Him Density Airports.
1. Predatory Comments By Large Carriers Concerning High Density Airports.
In their filings, the large carriers complain vehemently about the number of slots requested by affordable fare carriers at high density airports. Delta stated that "ValuJet has requested twice the number of slots ever previously granted by the Department under an exemption" (Answer of Delta Airlines), and that "ValuJet seeks 12 new slots." (Motion and Surreply of Delta Airlines)
United also complains that new entrants could want, "...enough slots to amount to three or four round-trips in competition with the incumbent would require the creation of 279 to 360 additional slots." /8 (Answer of United Airlines, June 9, 1997)
This would amount to approximately 10 fumes the number of slots currently requested by affordable fare carriers.
2. Pro-Competition Position of Larvae Carrier Concerning Heathrow.
As to Heathrow, those large carriers have requested more than 10 times the number of slots requested by affordable fare carriers at high density airports.
.. if we are unable to gain sufficient slots, gates and related facilities to offer a meaningful pattern of service, it is unlikely that Delta will be able to exert any real competitive discipline on this alliance. Merely granting Delta a few token slots will not allow Delta to compete with a proposed shuttle service.
Scott Yohe
[Delta is requesting more Heathrow slots than Mallet has requested at LaGuardia]
In fact, the total number of slots being sought by all U.S. carriers is a fraction - barely 12 percent - of the combined slots holdings of BA and AA.
Stephen Wolf
[Affordable fare carriers will accept 12% of the high density slots.]
US Airways estimates that U.S. carriers collectively need at least 60 daily take-off and landing slots (for 30 daily round-trips) to become effective competitors with the mega-alliance at Heathrow.
Larry Nagin
The surrender by BA and AA, without compensation, of 210 weekly slots at Heathrow Airport and 84 and 42 weekly slots at New York JFK and Chicago O'Hare Airports, respectively.9 This would provide airport slot access for other carriers equal to the competitive services eliminated by alliance.
Cyril Murphy
[United apparently wants to add to the slots it will not use. As the largest slot holder at O'Hare and US. Carrier at Heathrow, it wants even more slots, but attacks affordable air carrier requests for a handful of slots at O'Hare.]
9/ Is this the same United Airlines that believes that requests by new entrants for 1/10 of this number is "outrageous."
D. New Entrants Can Provide One-Stop Service at High Density Airports or Service Other Area Airports; However, One-Stop Service or Service to Gatwick is Unacceptable.
1. Predatory Comments By Large Carriers Concerning High Density Airports.
The large carriers believe that instead of serving high density airports, affordable fare carriers should be sent to other airports or consider one-stop service:
'There are a number of current viable substitutes including non-stop flights from other area airports as well as multiple connecting services." (Answer of Delta Airlines)
"Carriers at Midway are free to add capacity without regard to slot constraints." (Answer of United Airlines)
2. Pro-Competition Position of Large Carriers Concerning Heathrow.
As to London, the large carriers reject access to any airport other than Heathrow and dismiss the concept of one-stop service:
We do not believe that BA and AA would seriously contend that consumers particularly business travelers, would pursue alternatives to non-stop service. All applicable precedents have concluded that one-stop and connecting service are not reasonable alternatives to non-stop service.
Barry Simon
American Airlines three years ago testified that "although Gatwick and Stansted are available for expansion, as things stand today, consumer preferences and connecting service opportunities make Heathrow the only truly viable London Airport."
Barry Simon
Gatwick is not a competitive substitute for Heathrow, particularly for business travelers.
Scott Yohe
E. The Large Carriers Push for DOT to Scrutinize Closely International Hubs, But Accept the Exclusion of New Entrants High Density Airports.
1. Predatory comments by large carriers concerning high density airports.
The large carriers dismiss any concerns about their dominance of hubs and high density airports:
"The newly-found slots the government is interested to distribute to new entrants would provide greater benefits to the traveling public if they went to United." (Answer of United Airlines)
[United admits it does not use the slots it has.!]
"While Delta may be the only carrier offering Atlanta-LaGuardia service, this does not make Delta a monopolist." (Answer of Delta Airlines)
[The slot rules have enabled Delta to be a "monopolist"
on the Atlanta-LaGuardia route.]
2. The large carriers seek thorough review of "dominated" foreign hubs.
BA and AA each have massive influence with major travel agencies and corporations in their home markets. This is increasingly important as travel agencies and corporations become more and more transnational. In addition, BA and AA each have the most important frequent flyer programs in their home markets.
Barry Simon
... [The Alliance] means that the BA/AA colossus will have far more market power when it comes to dealing with travel agents and corporations.
Barry Simon
Donald Carty, President of American, explained in sworn testimony that "a carrier which achieves a substantial advantage over its competition in terms of frequency and scope of service at any airport ... will invariably obtain a disproportionate share of the traffic and revenue for flights originating at that airport."
Thus the dominant carrier will obtain a disproportionately larger share of the passengers originating at that airport.
Larry Nagin
Dr. Alfred Kahn, America's long-standing economic advisor and a recognized expert on the airline industry, has explained that disparities in the frequencies offered at, and the cities served from an airport result in disproportionate share gaps that "can obviously be the difference between success and failure."
Larry Nagin
Governmental bodies should have as their dual goals freeing the industry in terms of the elements of competition and protecting their citizens from the potential for anti-competitive abuse of that new open environment. This means encouraging alliances and the conditions that foster the, but at the same time developing antimonopoly policies that provide strict scrutiny of the "superhubs" so as to maintain the opportunity for meaningful intrahub competition.
Larry Nagin
An open skies regime will produce far more competition…
Scott Yohe
Cyril Murphy, of United Airlines even included an attachment to his testimony advocating that an essential role of government should be a "strict" government "scrutiny" of international superhubs. It is nothing short of ironic that United now wants the government to help it stifle competition at one of its U.S. superhubs.
In sum, the dominance by the large carriers of hubs and the high density airports makes it difficult for affordable fare carriers to compete on routes critical to their survival. The Department should immediately approve the slot requests it has before them and then -- as suggested by Cyril Murphy -- institute a strict review of the U.S. dominated hubs and the high density airports.
V. TESTIMONY OF THE CONSUMER FEDERATION OF AMERICA
In his testimony before the Senate Antitrust, Business Rights and Competition Subcommittee, April 22, 1997, Dr. Mark N. Cooper, Director of Research at the Consumer Federation of America made a number of points concerning the domination of international hubs that relate to competition in the U.S. and the high density airports:
The literature we reviewed identifies a number of specific airline practices that are designed to keep would-be competitors from establishing themselves at "dominated" hubs...
These include deals with travel agents to divert traffic, manipulation of computerized reservation systems, frequent flier programs, code-sharing, general policies of market segmentation, hoarding of take off and landing slots, hoarding of adequate gate space and esytration of excess profits on facilities.
This lack of adequate take-off and landing slots constitutes an overwhelming obstacle to anyone seeking to compete . . .
BA/AA should be required to relinquish an additional 420 slots, bringing the total of relinquished slots to 560 to 840 - an adequate number to support two new entrants on each route.
While this may seem like a large number of slots, it equals less than one-quarter that total that BA/M would control at Heathrow. In this sense, it is a divestiture of assets that is not unreasonable for a merger this size. It is also one that would protect the interests of the American consumer.
VI. OPEN SKIES IN THE UNITED STATES OF AMERICA
The Department of Transportation has significantly increased opportunities for large carriers to expand into international markets by reaching "open skies" agreements with countries throughout the world. Those "open skies" agreements have increased competition and choices for travelers.
At the same time that DOT is spending its resources to open the most important international business markets, the most important business airports in the United States - LaGuardia. Washington National, and O'Hare -- remain highly restricted. Even Heathrow Airport -- which is at the heart of the continuous debate over approval of AA/BA -- has seen more new entry and growth of competition than LaGuardia, National and O'Hare.
The Department of Transportation should concentrate its efforts on opening domestic markets. Surely, if faced with foreign airport restrictions as anti-competitive as those currently in force at America's high density airports, DOT would take action against the government imposing those restrictions and would be searching for sanctions to impose on the carriers from the country with such restrictions.
As part of DOT's "open skies" agreements, foreign carriers have been provided free access to high density airports. "Open skies" with Canada has resulted in Canadian carriers holding 46 slots at LaGuardia and 15 at National. Foreign carriers hold approximately 84 slots at O'Hare. /10
At the same time that DOT has opened the protected high density airports to foreign carriers -- including those aligned and partly owned by U.S. carriers -- it has not opened the market to new U.S. entrants. U.S. affordable fare carriers utilize lea than 10% of the slots utilized by foreign carriers at high density airports.
VII. DOT HAS AVAILABLE DELEGATED AUTHORITY TO GRANT IMMEDIATELY THE REQUESTS FOR SLOTS BY AFFORDABLE FARE CARRIERS
DOT has sufficient authority to provide the slots requested by the affordable fare carriers. Those carriers have asked for a small number of slots --- significantly less than foreign carriers hold at those same airports or large carriers have asked for at Heathrow.
10/ It is interesting that some of the same parties that have filed comments complaining about the impact of added frequencies on those living near LaGuardia and on the ATC system, did not object to approval of these "Canadian" operations. It is more than likely that this lack of objection is driven by the interest of Delta and other carriers in obtaining new access to Canadian markets without any threat from "affordable fare carriers."
As Secretary Goldschmidt did in 1980, DOT could take appropriate regulatory action to award slots within a few week period. It is time that DOT take steps so that airline competition will continue to exist.
To meet existing requests, DOT should take one of the following actions:
1. Grant slot exemptions; or
2. Withdraw slots from incumbents (as done by Secretary Goldschmidt Amendment 93.49, and proposed by the large carriers at Heathrow); or
3. Require foreign carriers to utilize their U.S. partner's slots - freeing up slots for affordable fare carriers. /11
CONCLUSION
The Department must ignore the delaying and anticompetitive tactics of the large carriers and ensure that high density airports are open to competition and entry by affordable fare carriers.
As Dr. Mark Cooper stated in his testimony,
Competition leads to lower prices and more choices for the traveling public. Econometric studies of market structure have consistently shown that concentration on routes, at airports, and in the industry at large (including liberalization on international routes) result in higher fares. Analyses of specific events -- entry, exits and mergers -- confirm these findings. Studies that try to decompose the market power associated with specific practices -creation of hubs, manipulation of computerized reservation systems and frequent flier programs -- reach similar conclusions. The evidence shows overwhelmingly that when there is vigorous competition the result is inevitably a lowering of fares by anywhere from 20 to 40 percent.
11/ Bob Crandall's written testimony before the Senate Aviation Subcommittee, June 4, 1997, stated that, "U.S. carriers with European partners can obtain slots for transatlantic use by the reallocation of slotsithin these partnerships to more valuable economic uses. United alone has sufficient slots for two more daily round-trip Heathrow-U.S. services; instead, it has leased excess slots to Lufthansa. Both the Delta Swisair-Sabena-Austrian and Northwest-KLM alliances have a number of Heathrow slots deployed on very low value operation. Northwest's partner, KLM, operates 40 weekly round-trip departures with 50-seat aircraft, and Sabena, one of Delta's European partners, operates a number of weekly round-trip departures at Heathrow using 46-seat. aircraft."
The position advocated by Mr. Crandall should apply to slots utilized by Canadian Airlines (owned in part and allied with American) and by Air Canada (allied with United) at LaGuardia and O'Hare.
If Scott Yohe is accurate when he claims that Delta cannot mount a "competitive presence" at Heathrow because Delta "cannot obtain slots," then Frontier, ValuJet, AirTran and Western Pacific cannot mount a competitive presence in the U.S. without slots. As Steven Wolfe said, 'Open skies" and competition brings "enormous benefits for travelers, communities, all airlines and their employees."
If the large carriers are accurate in that providing additional international competition will benefit the U.S., then providing additional competition in the U.S. and opening up markets for affordable fare carriers will also benefit the country and domestic passengers. Increased competition at high density airports will:
- lower prices and more choices for the traveling public
- provide business travelers in Atlanta, Denver, New York, Orlando, and Colorado Springs with affordable fare options for travel to New York, Chicago and Washington; and
- provide leisure travelers with affordable fares that will allow them to visit families and friends, to take family vacations and explore business opportunities.
- stimulate enormous business and economic opportunities in cities such as Akron, Bloomington, Moline, Fort Wayne, Chattanooga, Mobile, Jackson, Fargo and others that do not have non-stop service to New York, Washington, and Chicago.
While the Department should continue to support international expansion, it must reject arguments made by the same carriers seeking help outside of the United States as they attempt to eliminate domestic competition. Those arguments made by large carriers to support competition in international markets, justify Departmental action at high density markets. They can't have it both ways! The Department has taken a series of steps over the past decade to promote entry and competition. It is more important than ever that those actions needed to promote deregulation and competition are accelerated.
Now is the time for the Department to take the steps necessary to provide access for new entrants at the high density airports. Providing the slots requested will have minimal impact economic impact -- but not acting will have a negative impact on the costs for millions of travelers and the future economic growth of communities throughout this country.
Respectfully submitted,
Edward P. Faberman
Executive Director
Air Carrier Association of America
1747 Pennsylvania Avenue, N.W.
Suite 900
Washington, D.C. 20006-4604
Submitted July 9, 1997
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